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  • FINANCIAL STABILITY REPORT February 2018 | ISSUE NO. 24

  • Financial Stability Report- February 2018|Issue no. 24

    Production: Financial Stability Directorate

    Central Bank of Bahrain

    P.O. Box 27, Manama, Kingdom of Bahrain

    Tel: (+973) 1754 7777 | Fax: (+973) 1753 0399

    www.cbb.gov.bh

    The Financial Stability Report (FSR) is a semi-annual report prepared by the Financial Stability Directorate. It is available as an

    electronic version in PDF format in the Publications and Data section at http://www.cbb.gov.bh.

    http://www.cbb.gov.bh/

  • Central Bank of Bahrain FSR| February 2018

    Table of Contents i

    Table of Contents Table of Contents ..................................................................................................................................... i List of Tables ........................................................................................................................................... iii List of Charts ............................................................................................................................................ v Preface .................................................................................................................................................... 1 Executive Summary ................................................................................................................................. 3 Part I : Developments in the International and Domestic Financial Markets ........................................... 7 1. Developments in the International Financial Markets .................................................................... 8

    1.1 Overview ................................................................................................................................... 8 1.2 Global Macro-financial Environment ........................................................................................ 8

    2. Developments in Bahrain’s Financial and non-Financial Sector .................................................... 12 2.1 Overview ................................................................................................................................. 12 2.2 The Financial Sector ................................................................................................................ 12 2.3 Monetary indictors ................................................................................................................. 18 2.4 The Households Sector ........................................................................................................... 19 2.5 Overall assessment of the Bahraini Financial sector and non-Financial Sector. ..................... 23

    Part II: Performance of the Banking Sector ........................................................................................... 24 3. Overall Banking Sector .................................................................................................................. 25

    3.1 Overview ................................................................................................................................. 25 3.2 Overall Banking Sector Performance ...................................................................................... 25 3.3 Overall Assessment of the Banking Sector.............................................................................. 29

    4. Conventional Banks ...................................................................................................................... 31 4.1 Overview ................................................................................................................................. 31 4.2 Conventional Retail Banks ...................................................................................................... 31 4.3 Conventional Wholesale Banks ............................................................................................... 38 4.4 Overall Assessment of the Conventional Banking Sector ....................................................... 44

    5. Islamic Banks ................................................................................................................................ 45 5.1 Overview ................................................................................................................................. 45 5.2 Islamic Retail Banks................................................................................................................. 45 5.3 Islamic Wholesale Banks ......................................................................................................... 50 5.4 Overall Assessment of the Islamic Banking Sector .................................................................. 53

    Part III: Developments in Non-Banking Financial Sector ....................................................................... 54 6. Performance of the Insurance Sector ........................................................................................... 55

    6.1 Overview ................................................................................................................................ 55 6.2 Performance of Overall Insurance Industry ............................................................................ 56 6.2 Performance of Insurance Sector by Insurance Segment ....................................................... 58 6.3 Premiums and Claims Analysis by Class: ................................................................................. 59 6.4 Insurance Profitability: ............................................................................................................ 65 6.5 Performance of Re-Insurance and Re-Takaful Firms in Bahrain.............................................. 66 6.6 Regulatory Changes, Market trends and Risks. ....................................................................... 66

    7. Performance of Capital Markets ................................................................................................... 68 7.1 Overview ................................................................................................................................. 68 7.2 Bahrain Bourse ....................................................................................................................... 68 7.3 Market Resilience ................................................................................................................... 73 7.4 Capital Market Activities ......................................................................................................... 75 7.5 Performance of Brokers .......................................................................................................... 76 7.6 Mutual Funds .......................................................................................................................... 76 7.7 Risks & Challenges in Capital Markets ..................................................................................... 76 7.8 Developments in Regulation and Initiatives ............................................................................ 77

  • Central Bank of Bahrain FSR| February 2018

    Table of Contents ii

    Part IV: Developments in the Payments Systems, Fintech, and Cybersecurity ...................................... 79 8. Payments and Settlements Systems ............................................................................................. 80

    8.1 Overview ................................................................................................................................. 80 8.2 Real Time Gross Settlement System (RTGS) ........................................................................... 81 8.3 Scripless Securities Settlement System (SSSS) ........................................................................ 81 8.4 ATM Clearing System (ATM) ................................................................................................... 82 8.5 Bahrain Cheque Truncation System (BCTS) ............................................................................ 83 8.6 Electronic Fund Transfer System (EFTS) ................................................................................. 84 8.7 Financial Inclusion................................................................................................................... 86

    9. Fintech and Cyber Security ........................................................................................................... 90 9.1 Overview ................................................................................................................................. 90 9.2 Fintech and Financial Inclusion ............................................................................................... 91 9.3 CBB Cyber Security Initiatives ................................................................................................. 94

    Annex: Financial Soundness Indicators and Selected Graphs ............................................................... 99 List of Acronyms .................................................................................................................................. 110

  • Central Bank of Bahrain FSR| February 2018

    List of Tables iii

    List of Tables Table 2-1: Evolution of the size of the Banking sector in Bahrain .................................................................................. 14 Ta

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