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
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
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
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.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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