The smaller banks and financial institutions need to bolster their capital base otherwise their survival becomes very difficult in the emerging business scenario especially in the wake of Basel III requirements, according to a senior banker.
Hassan Jarrar, the CEO of Standard Chartered Bank Bahrain and, who is also a board member at the BAB told the media that the future mergers and acquisitions would be a reflection of the efforts being exerted by the Central Bank of Bahrain to encourage institutions to consolidate their financial base.
More precisely, Jarrar added, the upcoming capital adequacy requirements under Basel III will make it necessary for the bank to bolster their existing capital base otherwise it wouldn’t be possible for them to survive.
However, he said, where the consolidation is critical for the banks, the mergers among the Bahraini banks might not create an institution of one tenth of the size of Bank of America.
“The recent successful mergers among five banks have set a new benchmark in the region, thanks to encouragement of the Central Bank of Bahrain,” he added.
Hassan Jarrar referring to another challenge such as FACTA said that the implementation of each new regulation carries a price tag for the banks.
“This is another major challenge being faced by the banking industry globally.
The Chairman of the Bahrain Association of Banks (BAB), Abdul Razak Al Qassim told BAB Meet the Press that consolidation of the banking sector in Bahrain through merger and acquisitions has entered into a new phase.
Quoting as an example of merger of BBK and the National Bank of Bahrain, two leading institutions in the Kingdom of Bahrain, he said it would create a relatively big institution.
“If the assets and liabilities of these two leading institutions are put together, then you are looking at a relatively largest bank in the Kingdom,” Al Qassim said.
However, BAB Chief didn’t speculate on the merger or a possible time-frame if such move is on the cards among any banks in Bahrain.
“Bahrain’s banking sector has witnessed successful mergers in the recent past and any future move will bolster the sector,” he added.
Al Qassim who is also Chief Executive of the National Bank of Bahrain (NBB) and Chairman of Bahrain Islamic Bank (BisB) told The24X7News that Bahrain’s banks enjoy adequate liquidity levels.
“Bahrain’s banking industry is very liquid and sitting on very comfortable levels,” he explained.
Talking about the growth, Al Qassim said the first three quarters were very good for the banking industry in Bahrain and in the fourth quarter there was a likely hood of achieving growth of 6 to 7 per cent.
He said the biggest challenge for the banking industry in Bahrain would be the Basel III capitalisation requirements.
“Broadly speaking that the banking industry in Bahrain has no major issues but the projected GDP growth of 5% limits the scope of opportunities for the industry in general.”
BAB invited representatives of local and international media organisations to meet members of its Board and other senior officials drawn from its membership of almost 80 banks based in Bahrain.
Al Qassim opened the BAB’s fourth ‘Meet the Press’ event and discussed the results of Bahraini banks in H1 2013 and will also look at the theme of consolidation amongst banks in the Kingdom and other topics of interest.
Representatives from Bahrain’s banking sector including Hassan Jarrar, the Chief Executive of Standard Chartered Bahrain, alongside representatives from the Bahrain Economic Development Board (EDB) and the Central Bank of Bahrain (CBB).
The financial sector contributes 17 percent to Bahrain’s $30.4 billion GDP. But its importance goes beyond its actual fiscal contribution as it is a key factor in attracting trade and enterprise and Foreign Direct Investment (FDI) to Bahrain. The financial sector is also one of the largest sources of employment for Bahrainis who make up 66 percent of the workforce. This in turn has led to world-class institutions offering training and education for students entering the banking sector and on-going professional development for experienced bankers.