Gulf banks and individual investors are planning to set up a $3 billion Islamic investment bank and an Islamic stock exchange in Bahrain by 2009, the chief executive of Albaraka Banking Group said.

"It will be the largest bank in the region for the issuance of sukuk and will create a secondary market for sukuk," Adnan Yousif said on Wednesday. Sukuk are bonds that comply with Islam's ban on interest.

Albaraka is one of the lenders that is looking to invest in the new bank, which will have paid-up capital of $3 billion and plans to start operations in 2009.

The project is being promoted by the chairman of the General Council of Islamic Banks, Sheikh Saleh Abdullah Kamel, Yousif said.

Yousif said Bahrain also planned to set up a stock market in Bahrain complying with Islamic law.-Reuters