rasheed mohammed al maraj : improving risk management in bahrain address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the 2nd annual gcc regulators ’ summit, manama, 19 february 2008. * * * good morning ladies and gentlemen, it is a pleasure to be here today at the 2nd gcc regulators ’ summit, which the cbb has been delighted to support. i am happy to see so many of our colleagues from the region participating in this important conference, which aims to promote dialogue and discussion among the region ’ s financial regulators and the industry. thank you to mrs. jane diplock and to all of you for being here. this year ’ s conference is taking place against a backdrop of fresh challenges being posed by a number of global factors and their interplay with regional developments. the us subprime crisis and the ensuing credit crunch, as well as the societe generale incident compel us to proceed with caution, despite the boom all around us here in the region. in particular, these incidents underscore the need for good risk management and effective internal controls by financial institutions. indeed, both these elements are proving to be critical to ensuring the stability of individual financial institutions and financial systems. the role of the regulator in addressing these challenges is crucial. we can provide the guidance and create the appropriate regulatory framework to enable the sound and stable conduct of financial services and financial institutions. improving risk management practices of banks is an important component of the work being done by the central bank. moreover, the cbb has introduced an innovative approach to the application of basel ii, pillar one requirements to our islamic financial institutions. although islamic financial products are not explicitly mentioned in basel ii, the cbb has introduced, effective this year, a comprehensive basel ii compliant framework which provides for appropriate capital treatment of products such as murabaha, ijara, istisna ’ a, amongst others. this will ensure that regulations of international standards are applied to islamic financial institutions which will further enhance the reputation of what has become such a prominent segment of bahrain ’ s financial services industry. the cbb is also addressing the challenges faced by certain investments made by banking institutions, especially banks ’ exposure to the real estate market, with a view to encouraging banks to maintain a more balanced portfolio. we are fully cognizant of the evolving needs of the financial services industry and it is our endeavour to proactively adapt to them. thus it is

aims of the supervisory authority. 1. the role of banche popolari in the development of italy ’ s banking system italy ’ s banking system has undergone profound changes in the last decade : in size, in manner of operation and in organizational structure. rapid progress in information and communication technology, financial innovation, growing international openness, and changes in demand for banking and financial services have all led to stronger competition g. mure, “ dimensioni e processi di crescita ”, in fusioni e acquisizioni delle aziende di credito, proceedings of the conference held in modena, 13 - 14 april 1989. and prompted a far - reaching process of concentration among banking institutions and a rationalization of their productive structures. mergers have led to an increase in the average size of banks, more complex and structured forms of group organization, and a diversification of customer relation policies and methods. the number of banks has decreased, but the enormous growth of branch networks has kept competition strong in local banking markets. closer financial integration in europe has encouraged the market to open up to eu banks, particularly in recent years, and italian banks to venture abroad. in a rapidly evolving sector, the cooperative banks, for their part, have proved extremely dynamic while evolving in a variety of directions, depending on their different initial situations and the opportunities offered by their local economies. one segment of the cooperative banking sector has consolidated its position in its chosen markets, focusing on internal growth and successfully enacting the role of local bank with close connections with the fabric of small and medium - sized enterprises. the largest banche popolari, on the other hand, have concentrated on external growth, carrying out broad merger programmes, both within their category and outside, by acquiring former savings banks, local banks set up in the form of public limited companies, banche di credito cooperativo ( mutual banks ) and specialized banks. this has led to the formation of medium and large - sized groups that operate beyond regional borders. in some cases growth has led to changes in ownership structure − and greater market openness − as well as entry into new lines of business. both growth paths have greatly reinforced the category of cooperative banks as a whole. in the last decade, despite a reduction from 56 to 38 in the number of independent banche popolari and groups headed by banche popolari, their market share in italy has risen from 16. 8 to 21. 1 per cent of