Bahrain is home to more than 400 licensed financial institutions, representing a rich mix of international, regional and local names. They cover the full range of financial services, with particular concentrations in wholesale banking, insurance and funds/asset management. The financial sector is now the most important sector of the economy accounting for more than 27% of GDP. The financial sector is also the largest single employer in Bahrain, with Bahrainis representing over 80% of the work-force.

The sector is regulated and supervised by the Central Bank of Bahrain (CBB) (www.cbb.gov.bh) , which since 2002 has functioned as the single regulator for the entire financial system.

Bahrain's banking system consists of both conventional and Islamic banks and is the largest component of the financial system, accounting for over 85% of total financial assets. The conventional segment includes 19 retail banks, 69 wholesale banks, 2 specialized banks as well as 36 representative offices of overseas banks. The Islamic segment, offering a host of Shari?a compliant products and services include 6 retail banks and 18 wholesale banks, and the numbers are increasing continuously.

The banking sector has played a pivotal role in the emergence of Bahrain as a leading financial centre in the region. As at December 2006, banking sector assets stood at over US$180 billion, more than twelve times annual Gross Domestic Product.

Industry growth has been supported by an open market economy; stable and prudent macro-economic and fiscal policies; a credible regulatory framework in line with international standards; and a notably strong and well qualified local workforce. All these factors have combined to cement Bahrain's position as a regional banking hub, successfully attracting numerous foreign banking organizations to establish a physical presence in the country.

Recent growth in the sector has been backed by the good fortunes of the oil industry and the corresponding increases in liquidity. Banks are thus playing a central role in reinvesting surplus oil earnings as well as serving financing opportunities in other segments of the economy.

The Bahrain Stock Exchange (BSE) (www.bahrainstock.com) is the focus of capital market activities in Bahrain. The exchange has grown in the number of listed securities with 50 equities, 19 bonds (both conventional and Islamic) and 35 mutual funds currently listed. As at end December 2006, market capitalization stood at US$21.2 billion, representing roughly 160% of GDP.

Trading is carried out through 14 securities brokers active in the market and day-to-day trading takes place through the Automated Trading System (ATS). There is also a Clearing, Settlement and Central Depository System (CDS), which is likewise automated. These two systems have combined to ensure a fast and efficient trading process, ensuring delivery versus payment on a T+2 basis.

The capital market is under the regulatory and supervisory oversight of the Central Bank's Capital Market Supervision Directorate, which oversees both the primary and secondary markets. Following the enactment of the Central Bank of Bahrain and Financial Institutions Law 2006, a new and comprehensive set of regulations based on international best practices is being introduced.

The Central Bank of Bahrain (CBB) is responsible for regulating and supervising the whole of Bahrain's financial sector. Prior to the creation of the CBB in September 2006, the Bahrain Monetary Agency (BMA) had previously acted as the sole regulatory authority. The BMA was responsible, since its establishment in 1973, for regulating Bahrain's banking sector, and was subsequently given responsibility in August 2002 for regulating Bahrain's insurance sector and capital markets.

A summary of the licensing process and associated matters, such as CBB license fees and the commercial registration process, can be found in the CBB Guide to Licensing. Complete details of the CBB licensing process and requirements are prescribed in the CBB Rulebook. Each Volume contains a Module setting out the CBB's licensing requirements, with respect to the sector covered by the Volume in question, including a full description of the relevant Regulated Services.

Article 40 of the Central Bank of Bahrain and Financial Institutions Law 2006 prescribes that no person may undertake a Regulated Service in the Kingdom of Bahrain unless licensed by the Central Bank. Anyone wishing to undertake a Regulated Service must obtain the licence prior to undertaking such activity.

The CBB offers a 'one-stop' licensing service, whereby applicants may also obtain their commercial registration from the Ministry of Industry and Commerce through the CBB.

• Central Bank of Bahrain and Financial Institutions Law 2006
• BSE Law 1987
• Commercial Companies Law 2001
• AML Law 2001
• Financial Trust Law 2006