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"BAHRAIN'S bustling banking sector is set for a series of mergers and acquisitions, according to one of the kingdom's leading experts.
The changes in the banking profile of the kingdom's banks are outlined by Rasheed Al Maraj, Governor of the Central Bank of Bahrain, in an interview with The Report: Emerging Bahrain 2007, published by Oxford Business Group.
"A number of merger and acquisition deals are currently taking place in Bahrain and you are likely to see a wave of mergers involving smaller banks," said Mr Al Maraj.
"The industry should evolve in a competitive framework, governed by international practice.
"We want to make sure that all the building blocks within the industry are working properly, so we need a competitive market that serves Bahrain and other countries.
"We always emphasise that if banks want to grow, they have to work within the rules of the game. This also applies to Islamic banks, which are often seen to be operating under their own rules."
Mr Al Maraj told The Report that a major shift was the policy of single licensing for banks.
"This is a major shift in our policy, as it is a complete departure from 30 years of experience," he said.
"In the past, offshore banking units had limited access to the local market. Banks now have more flexibility to operate onshore and the ability to work with a client base in Bahrain without any restrictions, as existed previously.
"We have now reached a critical mass in Bahrain for all sorts of financial institutions. Maintaining high standards and a strong reputation as a regulator will give a lot of comfort to foreign investors looking at Bahrain.
"Credibility is key and you need an umbrella of regulatory arrangements to make sure that the services will be provided in a professional and legal way.
"We have built on the Bahrain Monetary Authority's courageous steps in the 1970s, when Bahrain opened its markets to foreign banks. Since then, we have focused on improving the sector's status in the kingdom."
Oxford Business Group (OBG) is a UK-based publishing, research and consultancy services organisation and publishes economic and political intelligence on the markets of the Middle East, Eastern Europe, North and South Africa and Asia.
