Identifier
Created
Classification
Origin
06MANAMA1680
2006-09-20 13:50:00
CONFIDENTIAL
Embassy Manama
Cable title:
BAHRAIN MONETARY AGENCE BECOMES CENTRAL BANK
how-toVZCZCXRO4558 OO RUEHDE DE RUHMK #1680 2631350 ZNY CCCCC ZZH O 201350Z SEP 06 FM AMEMBASSY MANAMA TO RUEHC/SECSTATE WASHDC MMEDIATE 5639 INFO RUEHZM/GULF COOPERATION COUNCL COLLECTIVE PRIOITY RUEATRS/DEPT OF TREASURY WSHDC PRIORITY RHMFISS/HQ USCENTCOM MACDILL AFB F PRIORITY RHBVAKS/COMUSNAVCENT PRIORITY
C O N F I D E N T I A L MANAMA 001680
SIPDIS
E.O. 12958: DECL: 09/20/2016
TAGS: EFIN ECON BAECTRD OFFICIALS
SUBJECT: BAHRAIN MONETARY AGENC BECOMES CENTRAL BANK
Classified By: AmbassadorWilliam T. Monroe for reasons 1.4 (b) and (d)
1 (C) During a September 10 meeting with a Departmet of
Treasury delegation led by Assistant Secretry for Terrorist
Financing and Financial Crimes 'Brien, the Ambassador asked
Governor Rasheed Maraj about recent news that his
organization had changed from the Bahrain Monetary Agency
(BMA) to the Central Bank of Bahrain (CBB). Maraj confirmed
the transformation, saying it had been necessary because the
1973 law that governed the BMA was almost outdated. The law
had been conceived when the financial sector in Bahrain was
in its infancy. The law did not cover non-banking financial
services like insurance, resulting in a fragmented legal and
regulatory structure. The new law, called the Central Bank
of Bahrain and Financial Institutions Law, entered into force
on September 7.
2. (C) Maraj said the law enhances the independence of the
CBB and gives the Central Bank more authority and a clear
mandate to regulate all financial activities. He commented
he hopes that the GOB views the CBB as an independent
institution and that the two entities develop a "streamlined"
working relationship. He noted that Saudi Arabia is now the
only GCC country that does not have a formal central bank.
3. (U) In an interview published in the September 14 Gulf
Daily News, Deputy Governor Anwar Khalifa Al Sadah said the
CBB has "strong operational independence and a wider range of
enforcement powers." The CBB was established with authorized
capital of BD 500 million ($1.325 billion),of which BD 200
million ($530 million) is paid up. Al Sadah said the CBB law
consolidates into a single piece of legislation the full
scope of the Bank's responsibilities as a central bank and
regulator of Bahrain's financial services industry. The law
stipulates that the CBB Governor will hold ministerial rank
and will be appointed for a renewable five-year term. Two
sections of the law on the capital market and the offering of
securities describe the process for listing and dealing in
securities, and also make insider trading and market abuse
statutory offenses. The law does not affect existing
currency in circulation, which remains legal tender.
4. (C) Comment: Modern and efficient management and
regulation of the financial sector, which in 2005 contributed
BD 966 million ($2.56 billion) to the economy, and which
represented the single largest sector of the economy at 27.6
percent, is a key strategic objective of the government.
Recognizing that updating the BMA was a critical requirement
for Bahrain to maintain its regional comparative advantage in
finance, the government moved quickly to promulgate the new
law. With new financial centers growing in the region, most
prominently in Dubai and Qatar, Bahrain hopes that the
establishment of the Central Bank of Bahrain allows it to
stay one step ahead of its rivals in regulating and providing
oversight of the financial sector.
********************************************* ********
Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
********************************************* ********
MONROE
SIPDIS
E.O. 12958: DECL: 09/20/2016
TAGS: EFIN ECON BAECTRD OFFICIALS
SUBJECT: BAHRAIN MONETARY AGENC BECOMES CENTRAL BANK
Classified By: AmbassadorWilliam T. Monroe for reasons 1.4 (b) and (d)
1 (C) During a September 10 meeting with a Departmet of
Treasury delegation led by Assistant Secretry for Terrorist
Financing and Financial Crimes 'Brien, the Ambassador asked
Governor Rasheed Maraj about recent news that his
organization had changed from the Bahrain Monetary Agency
(BMA) to the Central Bank of Bahrain (CBB). Maraj confirmed
the transformation, saying it had been necessary because the
1973 law that governed the BMA was almost outdated. The law
had been conceived when the financial sector in Bahrain was
in its infancy. The law did not cover non-banking financial
services like insurance, resulting in a fragmented legal and
regulatory structure. The new law, called the Central Bank
of Bahrain and Financial Institutions Law, entered into force
on September 7.
2. (C) Maraj said the law enhances the independence of the
CBB and gives the Central Bank more authority and a clear
mandate to regulate all financial activities. He commented
he hopes that the GOB views the CBB as an independent
institution and that the two entities develop a "streamlined"
working relationship. He noted that Saudi Arabia is now the
only GCC country that does not have a formal central bank.
3. (U) In an interview published in the September 14 Gulf
Daily News, Deputy Governor Anwar Khalifa Al Sadah said the
CBB has "strong operational independence and a wider range of
enforcement powers." The CBB was established with authorized
capital of BD 500 million ($1.325 billion),of which BD 200
million ($530 million) is paid up. Al Sadah said the CBB law
consolidates into a single piece of legislation the full
scope of the Bank's responsibilities as a central bank and
regulator of Bahrain's financial services industry. The law
stipulates that the CBB Governor will hold ministerial rank
and will be appointed for a renewable five-year term. Two
sections of the law on the capital market and the offering of
securities describe the process for listing and dealing in
securities, and also make insider trading and market abuse
statutory offenses. The law does not affect existing
currency in circulation, which remains legal tender.
4. (C) Comment: Modern and efficient management and
regulation of the financial sector, which in 2005 contributed
BD 966 million ($2.56 billion) to the economy, and which
represented the single largest sector of the economy at 27.6
percent, is a key strategic objective of the government.
Recognizing that updating the BMA was a critical requirement
for Bahrain to maintain its regional comparative advantage in
finance, the government moved quickly to promulgate the new
law. With new financial centers growing in the region, most
prominently in Dubai and Qatar, Bahrain hopes that the
establishment of the Central Bank of Bahrain allows it to
stay one step ahead of its rivals in regulating and providing
oversight of the financial sector.
********************************************* ********
Visit Embassy Manama's Classified Website:
http://www.state.sgov.gov/p/nea/manama/
********************************************* ********
MONROE