No big banks seen leaving Bahrain due to unrest

Gov't official seeks to soothe concerns that political crisis will hurt Gulf state's status as financial hub
No big banks seen leaving Bahrain due to unrest
Bahrain Financial Harbour.
By Reuters
Tue 12 Apr 2011 07:08 PM

No big financial institution is

planning to leave Bahrain due to political unrest, a government

official said on Tuesday, seeking to soothe any concerns that

the ongoing political crisis would hurt Bahrain's status as a

financial hub.

Bahrain saw the worst sectarian unrest between its majority

Shi'ite population and its Sunni rulers since the 1990s,

resulting in the death of at least 13 protesters and four police

before Bahrain declared martial law last month and invited

troops from Sunni Gulf neighbours to help quell the unrest.

The clashes as well as the heavy-handed security crackdown

that followed have resulted in the Formula One Grand Prix

opening being cancelled, conferences moved and bankers doing

deals elsewhere, raising fears that financial institutions could

move their offices to the more stable Dubai.

"We confirmed with them that the vast majority of banks are

staying, they're all committed to Bahrain, they recognize the

business in Bahrain," Boyd Winton, director for financial

services at Bahrain's Economic Development Board (EDB) told a

news conference.

The EDB sets Bahrain's economic policies and is tasked with

attracting international business to Bahrain to diversify the

economy away from oil. The financial industry accounts for about

25 percent of Bahrain's GDP.

Winton said only four financial services institutions had

told the government they planned to leave. This included two

firms who maintained only a representative office with one staff

and an asset management company that he said had long planned to

leave by the end of the year.

But bankers say lenders will avoid officially closing down

their offices and instead will quietly move some staff to Dubai

to prevent their relationships with the Bahraini government from

being damaged.

Bahrain as a financial hub had been severely hit before the

unrest. Its investment firms posted steep losses since a

regional property bubble burst in 2008 ended their business

model of arranging financing for real estate projects. They have

failed to develop new business since.

Bankers say Bahrain is struggling to attract new financial

businesses to the island kingdom to compensate for the jobs

slashed at these companies over the past two years, and that

newcomers to the Gulf Arab region are likely to choose Dubai as

their regional office due to the unrest.

Banks in Bahrain are now also expected to be hit by higher

volumes of loan defaults as the unrest has severely hurt the

cash-flows of their corporate loan customers in Bahrain.

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