In an exclusive interview, Khalid Hamad Executive Director, Banking Supervision at the Central Bank of Bahrain, asserts that financial sector in Bahrain remains healthy despite macroeconomic and domestic challenges.
How have Bahraini banks performed in 2017 and what are your projections for this year?
Compared to 2016, the Bahraini banking sector has fared resiliently against three broad benchmarks last year—growth, profitability and capitalisation. This is commendable considering the regional slowdown and cutbacks on new large governmental projects. The projection for this year is for continued stability and conservative growth.
What were the milestones achieved by the financial sector in 2017?
Despite a contractionary background, Bahraini banks have managed to grow their franchise network by increasing branches both domestically and abroad. Non-performing loans (NPL) as a percentage of loan portfolios have declined and appear to have stabilised. Preparation and implementation of IFRS- 9 for the banking sector was completed. Additionally, consultation papers for risk management enhancement initiatives have been issued and responses received. Large strides in the field of fintech was also achieved via introduction of new licensees, products and services, which have made the financial sector more efficient by improving quality, fees and speed of service.
How has the country’s banking sector supported the Bahraini economy and how do you see this developing over the short term?
The banking sector have supported the slowdown in the real-estate sector through the revival of several stalled projects under a government-sponsored scheme. Support to the SME sector and social housing has also been strong and is expected to continue.
What do you see as the main risks that may impact the stability of the financial sector this year?
The main risk to the economy remains the volatility of oil prices, though present price levels are adequate to support sound recovery. Moreover, the introduction of VAT this year will have an impact on consumer purchasing power though it is expected to be implemented later this year around October or November of 2018.
In your opinion, what are the long-term challenges for financial institutions in Bahrain?
The main long-term challenge will remain Bahrain’s competitive ability vis-à-vis regional competitors. The recent discovery of substantial oil and gas offshore and on-shore reserves provides a positive aspect for the long term.