your finances
While planning its economic diversification, Bahrain took advantage of its position as the Gulf’s central oil supplier to attract the world’s leading banks and insurance companies. Bahrain is now known as an international and regional wholesale interbank money center for the Middle East and beyond. The first offshore banking license was awarded in 1975. The country now has dozens of OBU’s, as well as commercial banks, specialized banks, investment banks, representative offices, money and foreign exchange brokers and moneychangers. It also has a large number of insurance companies.
According to an article published in Gulf Daily news in July, Bahrain’s banking industry is booming, with the consolidated balance sheet soaring to $163 billion at the end of June 2006. This is 33.5 per cent up on the same time last year, according to Central Bank of Bahrain (CBB) figures.
Where to manage your finances
There’s no shortage of banks in the cities, towns and villages of the Bahrain.
There are international, regional and local banks, all well financed, well regulated and well run. Although there have been one or two notorious banking scandals in the region, notably the closure of BICC bank, banks are generally solid and well supported, and both the regulation and finance exist to forestall major incidents in the future.
Banks fall into a number of categories. Some central banks operate as clearing banks as well as being the regulatory institution. There are also corporate or merchant banks, providing venture and investment capital for institutional investors. Investment banks extend their services to individual investors, notably ‘high net worth individuals’ interested in portfolio management. Finally, there are retail or ‘high street’ banks for the masses. There are no savings and loan banks or mutual building societies operating as banks in the region. The services offered in other countries by these organisations are undertaken by the ‘normal’ banks in Bahrain.
As a working expatriate, you’re likely to open a standard current or deposit account with one of the many international banks found throughout the region. Banks such as Standard Chartered, Citibank, British Bank of the Middle East and others provide a reasonable service, bank charges are quite low and loan terms are competitive. (Banks are keen to attract customers and therefore eager to issue loans.) Banking in Bahrain has now become highly automated compares favourably with banking in other advanced countries.
Some banks offer drive-in services, although doing business quickly is unnatural to the temperament of the region. Others provide mobile banking facilities for outlying villages and remote areas. Large industrial complexes often have banks on site for the convenience of their workers and this is also the case with some civil service organisations such as police training centres.
If you have a complaint against a bank and cannot resolve it through the bank’s senior administration, the next course of action is to appeal to the Chamber of Commerce for advice, or perhaps the regulatory Central Bank; the civil court is your last recourse, but this is rarely necessary.
Banks’ Opening Hours
There are variations in bank opening hours throughout the region. In general, banks are open from 8am to 1pm, Saturdays to Wednesdays, when many banks re-open in the afternoon from 4.30 to 6.30pm. On Thursdays, opening hours are usually 8am to noon, and banks (like other businesses) are closed on Fridays. Companies dealing in foreign exchange and money transfers usually work later in the evening, particularly those located in shopping malls and main shopping thoroughfares.
How to open a bank account in Bahrain
The formalities involved in opening a bank account in Bahrain are quite stringent and involve a considerable amount of paperwork.
It’s mandatory to have a residence visa, which demonstrates your right to be in the country. You also require a ‘letter of no objection’ or a ‘no objection certificate’ (NOC) from your employer. The employer’s letter needs to stipulate your salary, to show the amount that will regularly be paid into the bank. Some banks will ask to see your tenancy agreement to establish your residential address, and most will ask for a photocopy of your passport. You should take copies of all these documents, as well as identity photographs.
A worker’s dependants (e.g. wife and family) can open an account with his permission, as he’s in effect their sponsor.
Current Accounts
Cash is preferred for everyday transactions in Bahrain, where people are generally suspicious of cheques. In fact, although utilities companies and other major service providers accept personal cheques for regular payments, these are most unlikely to be accepted by local retailers, as they carry no guarantee of payment, even though issuing a cheque without the necessary funds in your account is a criminal offence in the region. Most current accounts are therefore not cheque accounts, although these are also available.
All the standard banking services are offered by Bahrain banks, including cheque clearance, standing orders, direct debits and credit card repayments. A certain number of transactions per year are usually free, after which there might be a charge levied, usually at the discretion of the bank manager. Charges vary between banks, as they do in other countries, so shop around before opening an account with a particular bank. Cash dispenser cards are issued as a matter of routine, with the standard security measure of personal identification numbers (PIN) to allow access to your money through ATMs. Personal credit and charge cards, most of them underwritten by Visa or MasterCard, might also be issued by a bank, but these must be negotiated with your banker and often have spending restrictions.
It might be in your interest to open an account with your employer’s bank: favorable terms might be offered for group accounts and your salary might be accessible more quickly if the accounts are in the same system. If you wish to change bank, it pays to be honest and close your account instead of leaving a small amount in it to keep it active, as you’re likely to incur charges. Current accounts pay little or no interest on account balances and, if they do, you must usually have a substantial balance to qualify. It’s better to keep surplus funds in a savings or deposit account.
The information shown on personal cheques is fairly standard (i.e. the name of the bank, the branch, your name(s), the date, etc.), and the layout of cheques is similar to UK or American cheques. The recipient’s name is written on the top line, the amount written in words on the following line and the amount in figures entered in the adjacent box. You sign the cheque on the line at the bottom. An important point to remember is that Arab names are very similar, especially in their diminutive form, so you should be sure to write the full name of an Arab recipient. You aren’t entitled to reimbursement for a ‘misdirected’ cheque if you’ve been careless and inaccurate when writing it, although banks are responsible if they’ve honoured a cheque which doesn’t bear your proper signature.
A large transient expatriate population means that financial abuses aren’t uncommon, and the banks protect their interests carefully, with the support of the judicial system.
It’s important to understand that, in the case of serious financial difficulties, expatriates are unlikely to receive much in the way of sympathy and understanding, since their services in the country are viewed as expendable. In cases of criminal financial actions, penalties are likely to be harsh and might involve confinement for indeterminate periods while the judicial process takes its tortuous course, especially in the more conservative states.
Savings & Deposit Accounts
You can open a savings or deposit account with any retail bank in Bahrain. There are no specific savings banks such as thrifts or S&Ls in the USA or building societies or ‘mutual companies’ in the UK. Although savings accounts offer lower interest rates than deposit accounts, they have the advantage of easy withdrawal at any time. Savings account holders receive a monthly statement issued in order to record the progress and details of the account. Holders might also be issued with a cash card for use in ATMs, a cheque book and a credit card, depending on the type of account.
There are many types of deposit account available, offering varying rates of interest according to the amount on deposit and minimum deposit period. This is usually a month, although some banks pay interest after a week – generally on large amounts only. High interest accounts are available but require substantial amounts to be deposited in order to qualify for the higher levels of interest. Some banks offer standing order facilities with these accounts and issue cheque books, but there might be maintenance charges and a limit on the number of cheques that can be issued annually.
In many banks, you can open savings accounts designed for major foreign currencies, predominantly US$ and GB£. Most expatriates, however, wish to export the majority of their income to accounts outside the region.