Hisham Al Rayes, CEO, GFH Financial Group: Interview

Interview: Hisham Al Rayes

How would you rate the government’s approach to the current fiscal situation?

HISHAM AL RAYES: In 2016 we have witnessed serious efforts by the government to operate like a corporation, with a sound approach to managing its balance sheet. Firm steps are being taken towards diversifying the economy, including many positive reforms, such as significant reductions in both unnecessary spending and subsidies. From a revenue perspective, ministries and government agencies are providing more efficient services and seeking to realign fees, which are still lower when compared to some of Bahrain’s neighbours. In due course we expect to see Bahrain’s balance sheet become less dependent on oil proceeds, with decent inflows from services and investment proceeds established. Such reforms give institutions like GFH and others in the private sector more confidence in the economy and its investment prospects.

In my opinion, these measures are contributing to a brighter future for the economy, and the government needs to communicate the long-term benefits of such reforms to the public.

What mechanisms exist in Bahrain to help struggling financial institutions?

AL RAYES: The Central Bank of Bahrain (CBB) has worked closely with all financial institutions to provide guidance, resolve financial difficulties, maintain healthy positions and transform banks into internationally qualified platforms.

Both Rasheed Mohammed Al Maraj, the governor of the CBB, and Khalid Hamad, executive director of banking supervision at the CBB, have been strong supporters of Islamic banks, and we have benefitted from the great concentration of Islamic financial institutions in Bahrain. This is a key benefit to any new investment or commercial bank with its headquarters in Bahrain. The CBB’s policies have provided a roadmap for Bahrain’s banks to navigate both good and difficult times, helping to ensure continuity and avoid future market downturns.

What key competitive advantages does Bahrain have in terms of financial services?

AL RAYES: First of all, there is stability. The openness of the economy, the simplicity of regulations and the long-term commitment to the US dollar peg generates stability and promotes an environment that is attractive for foreign investment.

Second, in terms of Islamic finance, Bahrain has always been at the forefront. With the highest concentration of Islamic banks in the world, the kingdom is well positioned to become the leading Islamic financial services centre.

Third, Bahrain has the regulatory framework, the technology and the skills necessary for success in the sector. It possesses a significant pool of talent that is well prepared and has a culture of building long-term relationships with clients. Across the GCC region and internationally, Bahrainis are acknowledged for their openness and ability to deliver.

Fourth, Bahrain is at the heart of the development of standardisation and is home to key institutions such as the Accounting and Auditing Organisation for Islamic Financial Institutions and the Islamic International Rating Agency. Their presence in Bahrain makes it the home of Islamic finance.

Fifth, Bahrain has value creation potential; quality assets can be acquired or ventured with valuations much better than those in neighbouring countries.

Sixth, Bahrain has the legal framework, the legislation and the government commitment to maintain an independent, unbiased judicial system.

Lastly, the CBB’s willingness to act as a pioneer in the segment and readily adopt standards like Basel III has helped to establish Bahrain as a safe, long-term and forward-thinking base for operations.