Interview: Jean-Christophe Durand
How are the kingdom’s banks adapting to the pace of regulatory changes, such as the Basel guidelines, and new technologies?
JEAN-CHRISTOPHE DURAND: There have been a number of changes in the industry, driven both by regulatory guidelines and the development of new technologies. The whole GCC region has embraced these changes. Bahrain plays a leading role and remains at the forefront thanks to its exposure to international markets, and a regulator that encourages innovation and supports the evolution of the banking sector. Local regulations are evolving and adapting to the changes in order to offer the industry a regulatory framework of the highest standard. This is the case, in particular, for digital innovation. Technology is a disrupting factor for the banking industry worldwide. It facilitates the interaction between the clients and banks, provides new services and products to these clients, and meets their needs in a more efficient manner. Banks have to adapt to this new trend. Digital services are an area with significant potential for growth and efficiency, and for better control of operational risks. NBB is therefore taking steps to become more digital both internally and externally.
How well positioned are Bahrain’s banks to take on a greater role in financing key national projects and infrastructure development?
DURAND: Bahrain’s Economic Vision 2030 is focused in large part on diversification and on increasing the role the private sector plays in economic growth. There are a number of very large infrastructure projects under way, totalling BD32bn ($84.9bn), which are important for supporting further economic growth and private sector investment in key projects. Additionally, public-private partnerships could be a very beneficial way to decrease the burden on government spending while increasing the involvement of the private sector. There is liquidity in the market to participate in those large projects, but we have to keep in mind that the Basel guidelines are making long-term financing more challenging for banks, and the sources of funding for these projects will need to be diversified in the future, such as debt capital markets or foreign investment.
The large issuance of sovereign bonds in the region at favourable rates is another element to take into account, as they attract a lot of interest and liquidity from local banks and regional investors due to their perceived limited risk. This liquidity could also be deployed to the financing of large projects or some specific segments, such as small and medium-sized enterprises. Banks should be encouraged to increase lending in areas that boost the local economy and strengthen infrastructure, so that they have a balanced strategy that is not excessively risk averse.
In what ways can Bahrain best distinguish itself in the region as a centre for banking and finance?
DURAND: To differentiate itself as a regional centre for financial services, the kingdom needs recognised and high-quality regulatory authorities, human resources and the ability to adapt quickly to industry trends. A strong base of knowledge and expertise is equally important. The past strength of Bahrain’s financial sector provides a good foundation, but education will continue to play a central role in the kingdom’s ability to differentiate itself as a financial hub within the region. Bahrain has an educated workforce and a depth of local talent in the finance sector, so this will work to its benefit going forward, particularly as adaptability to the changing environment becomes increasingly important.
Banking is a global industry and therefore new regulations, new trends and new client requirements impact the industry in every part of the world. In order to differentiate the country as a financial hub, we need to therefore be leaders, not followers.
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