Bahrain's Financial System Commended in IMF Report
Manama (Bahrain): The International Monetary Fund (IMF) has recently published the results of their financial sector assessment programme (`FSAP') review of the Kingdom of Bahrain.
The results of that review were positive. The assessment viewed Bahrain's prudential regulations as modern and comprehensive. It also assessed the BMA's supervision as generally effective, especially in the dominant banking sector.
The review stated that the main risk to financial stability stems from potential overheating in regional economies, but it concluded that Bahrain's financial sector should be resilient to likely shocks.
The main recommendation made was the need to increase supervisory capacity, in line with new regulations and the growth in the financial sector. Certain legislative improvements were also suggested, including ratification of the draft Central Bank of Bahrain Law, currently before Parliament.
In terms of developing the financial sector, the report encouraged the further expansion of the Islamic sector, housing finance and the deepening of securities markets, as important to the future growth of the financial sector.
Finally, the assessment team commended the authorities and market participants in Bahrain, for the excellent cooperation they received.
The objectives of the FSAP are to assess the stability of financial systems as a whole, and to make recommendations that would strengthen resilience to financial crises and deepen financial sector development.
FSAPs are undertaken voluntarily by countries: since the Programme's introduction in 1999, more than 80 countries have participated.
'We undertook the FSAP to demonstrate our commitment to greater transparency and to ensure the continued sound development of the country's important financial services industry,' said Mr. Anwar Al Sadah, Deputy Governor of the BMA.
Bahrain FSAP's review was undertaken during the course of 2005, and involved several visits to Bahrain by assessment teams, as well as extensive paper-based reviews of financial data, laws and regulations.
The assessment is published on the IMF website (www.imf.org), at http://www.imf.org/external/pubs/ft/scr/2006/cr0691.pdf.
The BMA will be drawing on the recommendations contained in the report in developing its future work priorities.