rasheed mohammed al maraj : global regulation and offshore centres – onshore vs offshore address by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the gcc private banking conference, manama, 7 march 2012. * * * your excellencies, distinguished guests, ladies and gentlemen : it is a great pleasure and a privilege to be addressing this conference. over the course of the day speakers and delegates will debate and reflect upon many aspects of the private banking environment, and i have no doubt that the initiatives which will be identified here will provide interesting and useful ideas. my speech today will concentrate on the importance of regulation to the financial industry in general, and the private banking environment in particular. i shall explore what the cbb has done, explain why that has been beneficial to our stakeholders, and provide an insight into our priorities in the coming period. the cbb has a proud regulatory history. our framework has been moulded over many years, and it has served our stakeholders well in times of local, regional, and international turbulence. it provides clear leadership and direction to licensees, and it is designed to provide investors with a detailed understanding of the way in which the cbb expects banks and financial institutions to discharge their responsibilities. this is due, at least in part, to our philosophy of “ constant improvement ”. as such a great deal of our work is pro - active, and all of our work is designed to mitigate risk in a controlled manner whilst accepting that risk is an inherent ingredient in the financial industry. we consult with practitioners and the various other stakeholders in the financial sector to understand their needs and desires, and we strive to be responsive to those needs. a fundamental premise of our approach is that we make considerable efforts to ensure that our licensees understand the importance of, and implement and comply with, recognized international best practice in their field. but not everything is local. global capital flows are critical for bahrain. we are a small nation ; we have an open economy and we do not impose complex capital controls. we welcome ethical investment from any source, and we recognize that inward capital flows benefit the wider economy. in keeping with those goals, the cbb has introduced a number of improvements to our regulations during the recent past, many of which have had an impact on the wealth management industry, either directly or indirectly. for example the role of corporate governance has been enhanced, and the cbb was a key player in the

effectiveness of boards of directors in overseeing the operations of the firms they run. this applies especially to ensuring high standards of risk management. we may also make changes to our framework with respect to the regulation of insurance brokers in the near future. in addition, we continue to monitor new recommendations originating from the international standard setting bodies, including the islamic financial services board and the international association of insurance supervisors. we are currently considering how to implement the standards that the ifsb issued last year on corporate governance and on solvency standards for takaful companies. both of these standards could have a significant impact on takaful firms. we also continue to play a role in the work of the iais in developing international standards and in this regard the cbb ’ s role has been enhanced by being selected as a member of the iais executive committee for a two - year term. the cbb ’ s selection is recognition of our bis central bankers ’ speeches efforts among the 17 middle east and north africa regulators to ensure the development and enforcement of high standards of insurance supervision and regulation. as a member of the iais executive committee the cbb will aim to represent the interests of all regulators in the mena region. our new role will allow us to shape major new regulatory initiatives and also to alert the industry to upcoming changes in regulation. while the cbb as a regulator can lay the groundwork of rules for the industry to follow, the industry ’ s development and future growth potential is primarily a matter for its shareholders and managers. this is not to say that we, as a regulator, are not keen to see the industry to grow and prosper. far from it. the development of the insurance industry is a major component of the kingdom of bahrain ’ s vision 2030 strategy that outlines the competitive, dynamic and diversified economy we aim to develop for a post - oil era. in our latest national economic strategy we have identified insurance and asset management as two sectors of the financial industry that have enormous potential for future growth. however, my point is that while regulators can provide the conditions for industry development, whether these opportunities are seized is a matter for shareholders and the managers of insurance firms. there are three specific topics that i think are worth emphasizing as we look to the industry ’ s future growth and development. the first of these is the need for the industry to ensure that it can meet high standards of customer service. the cbb has played its role in encouraging better customer service by mandating all insurance representatives (