Interview: Jean-Christophe Durand
How has Bahrain advanced in terms of financial technology (fintech), and what more can be done?
JEAN-CHRISTOPE DURAND: In both Bahrain and throughout the world in general, technology is set to become a more important part of the banking industry. The expectations of the younger generation in terms of the products, quality of service and experience provided by banks are changing. To keep up with this, banks across the kingdom are launching initiatives to improve online and digital banking services. We have advanced significantly on our own digitisation programme to accelerate digital capabilities and adoption.
In the coming years I expect even more investment in the digitalisation of banking operations. This process is important not only for the convenience of clients, but also for the internal efficiency of banks, and will be demanded by customers and shareholders alike. As the industry moves in this direction, Bahrain is also keeping pace. The central bank is taking swift action to ensure the right regulatory frameworks are in place, and the government and private sector have supported the creation of Bahrain FinTech Bay (BFB), launched in February 2018. NBB is among the founding partners of BFB, which has already attracted dozens of new and established fintech innovators and service providers, which can benefit local banks and digital transformation.
Over the kingdom’s 50 years of history, it has been a pioneer in terms of progress and development in financial services, and is now well positioned to support the next wave of change in the industry. Bahrain has a clear vision for developing a fintech hub and is prepared to lead the way for the broader region.
How is the increased need for private financing changing the banking landscape?
DURAND: There are numerous new private financing projects in Bahrain and the region in general, which have seen interest from local, regional and even international banks. In addition, government strategies such as the Economic Vision 2030 have planned to diversify the types of financing offered.
It is likely that we will see more involvement from local and regional banks in financing infrastructure and industry projects. In order to prepare for this, these banks need to adapt and have the means required to fulfil the requirements of large corporations or government entities.
Another element which will be important for the future is the financing of small and medium-sized enterprises (SMEs) and commercial lending. SMEs are the backbone of the economy, and we need to ensure that we have the ability to finance these companies and services, enabling them to develop and increase their market share. Local banks are gradually becoming more involved in financing SMEs in order to support their growth.
In what way have the International Financial Reporting Standard 9 (IFRS 9) requirements of equity specifications affected the banking sector?
DURAND: In general, regulations, when they are not excessive, are welcome because they introduce discipline and reduce risk. For local banks serving domestic and GCC markets, IFRS 9 has less of an impact than it does on international banks, where there is more risk. What these regulations do bring, however, is more discipline when dealing with clients – for example by requiring enhanced documentation and credit analysis. It is important to be stricter in relationships with clients to ensure we have an in-depth understanding of their requirements and review the banking experience on a regular basis, and so we are not penalised for failing to diversify our offering. Applying global regulations in the local market can be beneficial for improving a bank’s reputation and creating financial discipline, even if there is not as much of an effect on the attractiveness of lending.
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