The subprime crisis and ensuing credit crunch as well as the Societe Generale incident mean GCC regulators must proceed with caution despite the boom in the region.

That was the message from Central Bank of Bahrain (CBB) Governor Rasheed Al Maraj in his opening address to the Second Annual GCC Regulators' Summit which opened at the Ritz-Carlton Bahrain, Hotel and Spa yesterday.

'This year's conference is taking place against a backdrop of fresh challenges being posed by a number of global factors and their interplay with regional developments,' he said.

'In particular, these incidents underscore the need for good risk management and effective internal controls by financial institutions.

'Indeed, both these elements are proving to be critical to ensuring the stability of individual financial institutions and financial systems.'

The role of the regulator in addressing these challenges is crucial, he said.

Although Islamic financial products are not explicitly mentioned in Basel II, the CBB has introduced, effective this year, a comprehensive Basel II compliant framework which provides for appropriate capital treatment of products such as Murabaha, Ijara, Istisna'a, amongst others, he added.

'This will ensure that regulations of international standards are applied to Islamic financial institutions which will further enhance the reputation of what has become such a prominent segment of Bahrain's financial services industry,' he said.

'The CBB is also addressing the challenges faced by certain investments made by banking institutions, especially banks' exposure to the real estate market, with a view to encouraging banks to maintain a more balanced portfolio.

'The single regulator structure has also enabled the CBB to apply uniform standards of regulation and supervision to all our licensees, be they banks, insurance firms or capital market players.

'A forward-looking, market-enabling regulatory framework for the insurance and takaful industry has helped attract a critical mass of takaful and retakaful providers in Bahrain.

'All this is providing the momentum for the double-digit growth we are seeing in the insurance and takaful sector.

'The recent volatility in international stock markets underscores the need for transparency which the CBB has achieved through enhanced disclosure standards introduced as of the start of this year,' he added.

More than 300 delegates are taking part in the conference from as far apart as New Zealand and the US including central bankers and industry experts. The event closes today.-TradeArabia News Service