rasheed mohammed al maraj : impact of the current global financial crisis on bahrain ’ s economy address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the bcci seminar “ impact of the current global financial crisis on bahrain ’ s economy ”, manama, 18 november 2008. * * * ladies and gentlemen : i would like to thank the chamber of commerce and industry for their kind invitation to speak to you at today ’ s seminar. the topic that they have chosen, “ impact of the current global crisis on bahrain ’ s economy ” is very timely. until only a month or so ago, many commentators and analysts believed that the economies of the gcc would be an oasis of calm in the on - going financial turmoil. we also tended to hear a great deal about the so - called “ decoupling ” thesis. this was the idea that the emerging economies would continue their recent strong growth despite the economic downturn in europe and the united states. however, since the collapse of lehman brothers in mid - september, it has become clear that no part of the world will be immune to the current crisis. what began in september of last year as a crisis in the us real estate market – the so - called “ sub - prime ” crisis – earlier in this year turned into what we began to call the “ credit crunch. ” the losses that us and european banks suffered as the result of their exposure to sub - prime assets reduced their capital and hence their ability to lend. this sharply reduced the availability of credit in europe and the us, while at the same time both corporate and household borrowers attempted to de - leverage – that is, to reduce the amount of debt outstanding on their balance sheets. this was the situation that the world economy and financial system was facing until the middle of september. it pointed to a global economic slowdown, but the worst effects would be concentrated in the developed markets. the emerging economies were expected to continue their recent strong growth. the collapse of lehman brothers in mid - september moved the financial crisis into a new and much more unpredictable phase. the immediate effect was a scramble for liquidity in the main international financial centres, and by the large international banks. there was a massive rise in risk aversion in financial markets, reflected in a variety of indicators, including a rise in risk premiums – the margin that financial intermediaries demand for holding riskier assets – and steep falls in global stock markets

and we are cognizant that speed does not always equal quality. at the same time we recognize that protecting customers of the financial sector, and being seen to do so, is of paramount importance. in most instances the measures have been appropriate and prudent, and they have been designed with the best interests of the consumer as the foundation. it is obviously challenging to reach consensus in a global market, and some changes have been criticized as excessively stringent and even anti - competitive. i do not believe that is true. going forward, the cbb intends to concentrate on five major global regulatory initiatives throughout 2012 and beyond. these are : the implementation of a meaningful and achievable set of revised capital adequacy standards, often referred to as basle iii ; enhanced liquidity requirements, which are also included within the basle iii framework ; improvements in the corporate governance framework, where we are continuously refining our interpretation of the corporate governance code ; continuing to strive for improvements of the islamic finance regulations in coordination with the ifsb ; and relevant regulatory enhancements in respect of capital markets. these are challenging aspirations, and we anticipate that there will be many bumps in the road over the coming months and years as we strive to provide an effective, efficient, and pragmatic regulatory framework. in closing, i wish you all a very constructive and enjoyable conference, and i look forward to the contribution that the ideas presented today will provide to the growth and development of the wealth management sector of the financial industry. thank you for your attention. bis central bankers ’ speeches