rasheed mohammed al maraj : brief review of bahrain ’ s financial market developments speech by his excellency rasheed mohammed al maraj, governor of the central bank of bahrain, at the tradequest challenge awards presentation and luncheon, manama, 28 april 2007. * * * your excellencies, distinguished guests, ladies and gentlemen, good afternoon. assalam alaikum wa - rahmatullahi wa barakatuh it is a pleasure for me to be here today, and to show my support for the tradequest challenge programme. i should like to take this opportunity to thank all those who have supported this initiative, be they the financial community, the schools, or the participants and their parents. programmes such as these are collective efforts, and require the support of many. however, i should like to thank in particular the bahrain institute of banking & finance and the american association of bahrain, for their efforts in jointly establishing and managing this annual competition. special congratulations are of course also due to the students who took part in this year ’ s competition, for their commitment to learning about the world of financial markets and investment. before we start presenting the students with their well - earned certificates, i hope you will allow me if just say a few words about the significance of this programme, and its relevance to the development of bahrain ’ s financial markets. bahrain, as i am sure you are all aware, has a long and distinguished track record as the leading financial centre in the gcc. today, financial services accounts for almost 27 % of the country ’ s gdp, and creates an equally significant share of high value added employment in the economy. it is no exaggeration to say that the health of the financial services industry is of strategic importance to the continued economic well - being of this country. a key element in our success as a nation in this field has been the emphasis placed on developing our own human resources. international and regional institutions come to bahrain, in part, because there is a relatively strong supply of well qualified bahrainis whom they can hire. in turn, this country benefits from the wealth that is created by these financial institutions, and the training and experience gained in the workplace. fundamental to this human resources equation, is that we have people who understand finance and develop an interest in working in this industry. programmes such as these, therefore, play a valuable role in introducing young people to the world of finance, and hopefully giving them an interest in possibly pursuing a

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