The Central Bank of Bahrain (CBB) understands and appreciates the importance of place Bahrain’s banking system on solid ground and reaffirms its commitment towards the implementation of all international baking standards, including Basel III, said Rasheed M Al Maraj, Governor of the Central Bank of Bahrain, delivering the keynote address at The Global Financial and Economic Crisis – What Next workshop.
Conducted jointly by the CBB and the United Nations Conference on Trade and Development (UNCTAD), the two-day workshop was held at the Ritz Carlton Hotel, Bahrain. Al Maraj added that it was imperative to implement the global standards as the Kingdom continues to provide world-class banking services and adjusts to the inevitable evolutionary changes in the banking industry.
“We are fully aware that there lies ahead a paradign shift, in which new regulatiory standards will emerge to bridge the gap unveiled by the global financial crisis,” he added. For the last four years the world has been preoccupied with the financial crisis that started with the collapse of Lehman Brothers Bank,” he added. Its repercussions impacted many countries and organizations, said the governor.
While economic growth in most developed countries reduced dramatically, reaching levels never witnessed in a long time, most developing countries managed to maintain positive growth, albeit at a lower level than pre-crisis times, he added.
The crisis, he said, has stimulated a re-thinking of the practices and policies that had directed the global economy since the 1980s, during which the world witnessed a move to liberalise and deregulate financial markets. It also resulted in the end of separation between investment banking and commercial banking, said the governor.
He added that it was important to reflect on what went wrong and draw lessons from the past to put things back on track for a more stable and less risky business environment than in the pre-crisis years.
It will require internationally orchestrated efforts to achieve the highest degree of cooperation and implementation of new standards and practices, said the CBB head.
The right regulatory framework will help establish an environment that will lead to sustained global economic growth and reduce the risks associated with complex financial instruments, said Al Maraj.
“It is important to avoid the circumstances which previously led to economic bubbles – be it in real estate, stock markets or other commercial sectors,” he warned. Such circumstances open the door to structural imbalances and dislocation or resources when the economic conditions change, he added.
Regulators, he said, now face a huge challenge in the aftermath of the crisis. The preparation for change in regulatory framework will require the industry to embrace the new trends in banking regulations aimed at maintaining the sector’s contribution to economic growth, he added.
The objective, he added, is to build an environment, which avoids disruption arising from an oversized sector where the risks of its activities and products are miscalculated and unaccounted for.