responsibility for regulating and supervising the banking sector rested with central banks. this reflected, of course, the pattern typically established around the world, with central banks taking on banking supervision as an extension of their responsibilities for maintaining orderly payment systems and monetary policy. in most cases, the regulatory mandates of central banks in the gcc also extended beyond banks, to cover certain types of related non - bank institutions ( such as money changers and sometimes investment firms ). however, insurance supervision was separately regulated by commerce ministries, whilst stock markets ( and their broking members ) were run as self - regulatory organizations. in bahrain, the above model changed in may 2002, when the government announced the transfer of regulation of the insurance sector and capital markets to the bahrain monetary agency – the organization which at the time undertook the functions of a central bank and banking supervisor. this process culminated in september last year, with the passage of new legislation and the replacement of the bma with a new organization – the central bank of bahrain. this was a far reaching reform, creating the first integrated regulator in the region, and bringing together under one roof both prudential and conduct of business regulation for the whole financial sector. in addition to its comprehensive regulatory responsibilities, the cbb very much remains of course a central bank, responsible for systemic stability ( including oversight of the payments system and monetary policy ), as well as for other central bank functions such as currency issue, reserves management and the provision of banking services to government. other gcc countries, of course, have also initiated a variety of institutional changes. sama, for instance, has assumed responsibility for regulating insurance, and a separate capital markets authority has also been established. both qatar and dubai, meanwhile, have established integrated regulators for the separate jurisdictions established inside their territories, although existing regulatory structures largely remain unchanged for the rest of their financial sectors. qatar, however, recently moved regulation of the doha stock market out of the exchange, into a separate qatar financial markets authority. in short, this region is seeing a period of significant regulatory reforms, reflecting a variety of different approaches. however, they all share a common desire to see regulatory standards increased. different countries, of course, need to develop the institutional structures that work best for them, depending on the state of development of their markets and institutional considerations. in our case, we strongly believe that the single regulator model has worked well for us, for a number of reasons. the key advantage for bahrain has been the economies of scale and

profits ” in the banker, bahrain ’ s banking industry has turned in record earnings of us $ 3. 3 billion for 2007 and revenue momentum is expected to remain strong for the foreseeable future. unlike in the west, economies in this region have ample liquidity at hand so we are not as likely to suffer from credit worries. however, despite all the good news, the cbb is not taking a rest from its regulatory and supervisory role. we continue to take a proactive approach in developing new regulations or updating / revising existing ones, as appropriate, in line with our long - standing policy of implementing international standards. a key recent highlight has been the implementation, from the start of this year, of the basel ii regulatory framework, which will significantly enhance the risk management practices of bahrain ’ s banks. and, given the importance of islamic banking in bahrain, the cbb has become the first financial services regulator to adopt a comprehensive basel ii compliant framework which provides for appropriate capital treatment of islamic financial products. the cbb is also currently developing new rules to limit banks ’ exposure to the real estate market. although regulators cannot possibly micro manage the investment portfolios of their licensees, we do have a role to play in encouraging financial institutions to maintain more balanced portfolios. i would like to take this opportunity to stress that the cbb has an established policy of consulting with industry prior to implementing new or any upgrades to existing regulations. the cbb strives to be an even - handed, transparent regulator and we are open to suggestions from the industry. maintaining a regulatory environment that is, at once, business - friendly and adheres to international best practice is, undoubtedly, one of the success factors in bahrain ’ s development as an international financial centre of repute over the past 35 years. today, bahrain hosts the middle east region ’ s largest critical mass of financial institutions, which represent a good mix of international, regional and local players offering a very wide variety of services. within the financial services industry, the cbb sees significant growth in islamic finance, both banking and insurance, as well as private banking and the funds industry. in each case, the cbb has moved quickly to provide an enabling regulatory environment for the sound and stable development of that segment of the industry. ladies & gentlemen, i have no doubt that bahrain, as the middle east ’ s most mature financial centre, will remain at the forefront of financial developments in the middle east region. our core model remains strong and