Bahrain announces clearing and settlement guidelines

The central bank of Bahrain (CBB) issued a clearing, settlement and central depository module as part of the country's ongoing project to introduce a more transparent financial regulatory environment.

According to Ali Salman Thamer, director at Bahrain's Capital Markets Supervision Directorate, the module includes all "the regulatory requirements regarding licensing, ongoing obligations on licensed clearing houses and securities depositories, responsibility to maintain proper records, final accounts and auditing, finality of settlement, compliance issues, maintenance of confidentiality, business rules, business continuity plan and all other related activities and services that licensed clearing houses and securities depositories undertake".

Issued Monday, the module is part of the CBB's rulebook volume six.

"The module requires the clearing houses and securities depositories to be independent joint stock companies and licensed as financial institutions, subject to the CBB law and regulations, and facilitating the ongoing dematerialisation of securities in the kingdom," says Abdul Rahman Al-Baker, executive director of financial institutions at the CBB.

Since 2006, Bahrain's central bank has been pursuing regulatory changes to improve the country's attractiveness as a regional financial centre. Earlier changes included a trust registry for family succession planning and pension monies protection. The goal of the changes is to create a transparent, fair, orderly and efficient capital market.

"The release of this rulebook module is in line with the approach CBB is taking to raise the levels of transparency in the Bahrain market," says Richard Street, head of securities and fund services in the Middle East for Citi global transaction services. "We consider this an appropriate and important part of their ongoing effort to evolve their regulatory environment."

Citi intends to launch local custody in Bahrain this year, says Street. In January, the bank launched local custody and clearing in the United Arab Emirates.

According to the City of London's latest biannual Global Financial Centres Index, Bahrain's rank remained unchanged at 43 in the world, behind its regional competitor Dubai but ahead of Qatar. The index is derived from surveys of local market practitioners and regulators and underlying financial data.

The CBB plans to continue to issue new modules for its rulebook volume six to bring the country's financial framework closer in line to the International Organisation of Securities Commissions' standards.