Bahrain's banking system consists of both conventional and Islamic banks and is the largest component of the financial system, accounting for over 85% of total financial assets. The conventional segment includes 23 retail banks, 69 wholesale banks, 2 specialized banks as well as 36 representative offices of overseas banks. The Islamic segment, offering a host of Sharia compliant products and services include 6 retail banks and 18 wholesale banks.
The banking sector has played a pivotal role in the emergence of Bahrain as a leading financial center in the region. As at December 2006, banking sector assets stood at over US$180 billion, more than twelve times annual Gross Domestic Product.
Industry growth has been supported by an open market economy; stable and prudent macro-economic and fiscal policies; a credible regulatory framework in line with international standards; and a notably strong and well qualified local workforce. All these factors have combined to cement Bahrain's position as a regional banking hub, successfully attracting numerous foreign banking organizations to establish a physical presence in the country.
Recent growth in the sector has been backed by the good fortunes of the oil industry and the corresponding increases in liquidity. Banks are thus playing a central role in reinvesting surplus oil earnings as well as serving financing opportunities in other segments of the economy.