Islamic Banking

Bahrain Trust Law to Give Wealth Management Boost

Nick Parmee, 9 October 2006

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Bahrain is now fully open for business related to trust administration and trustee services, according to senior officials from the Central ...

Bahrain is now fully open for business related to trust administration and trustee services, according to senior officials from the Central Bank of Bahrain, formerly the Bahrain Monetary Agency.

The enactment of a new statutory law, the Trust Law, to govern trustees and trust administration has opened the doors for the establishment, management and administration of private business interests and wealth in estates and trusts.

It also allows financial institutions to offer other types of services using the trust mechanism, such as real estate investment trusts and private pension schemes.

“The Law is aimed at providing a clear and sound legal foundation for trust business, which is showing potential for growth in the Middle East region,” said Abdul Rahman Al Baker, executive director, Financial Institutions Supervision, at the CBB.

“This is a fairly new phenomenon in the Middle East: the potential for growth, however, is tremendous as the region boasts the world’s highest concentration of high net worth individuals, whose collective wealth is estimated at over $1.3 trillion”.

“The establishment of a trust, in a well-regulated environment, will broaden the available options for the transfer of business, property or other assets from one generation to another. It will also enable the Bahrain-based wealth management industry to develop and extend more innovative products and solutions,” Mr Al Baker said.

In Bahrain, just under 20 banks currently offer wealth management services.

“We hope the enactment of the Trust Law in Bahrain will encourage some of these institutions to offer such a service to their clients in the Middle East region,” said Mr Al Baker.

“The Trust Law also broadens the range of specialised services that can be offered by financial institutions. It will also enhance the development of investment products, both conventional and Islamic, that could be offered.”

The new Trust Law provides for the “appropriate levels of confidentiality” required to conduct this business. The new legislation provides for a trust to be established for a duration of a maximum of 100 years and requires a trust to be registered with the CBB.

The trust property may comprise any form of property, moveable or immoveable, tangible or intangible. A trust may have one or more trustees and a licence from the CBB is required for exercising the functions of a trustee.

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