The Central Bank of Bahrain (CBB) is the kingdom’s single integrated financial regulator, responsible for monetary policy, banking supervision, insurance regulation, capital markets oversight, and the licensing and supervision of all financial services operating in Bahrain. The CBB replaced the Bahrain Monetary Agency in 2006 under the Central Bank of Bahrain and Financial Institutions Law.
Regulatory Model
The CBB operates as an integrated regulator — a single institution supervising all categories of financial services. This model contrasts with jurisdictions that separate banking supervision, securities regulation, and insurance oversight among multiple agencies. The integrated approach was adopted to provide comprehensive oversight of Bahrain’s financial sector, which is large relative to the kingdom’s GDP and serves both domestic and regional clients.
Scope
The CBB licenses and supervises conventional banks, Islamic banks, insurance companies, investment firms, capital market participants, money changers, financing companies, and ancillary service providers. Bahrain hosts approximately 370 licensed financial institutions, making financial services one of the kingdom’s most important non-oil sectors by contribution to GDP and employment.
Islamic Finance
Bahrain was among the earliest jurisdictions to develop a comprehensive regulatory framework for Islamic finance. The CBB issues separate regulations for Islamic banking, takaful (Islamic insurance), and Islamic capital markets. Bahrain hosts AAOIFI (the Accounting and Auditing Organisation for Islamic Financial Institutions), and the CBB’s regulatory framework for Islamic finance is referenced by regulators in other jurisdictions globally.
Monetary Policy
The Bahraini dinar is pegged to the US dollar at a fixed rate of BHD 0.376 per USD. This peg has been maintained since 1980 and anchors Bahrain’s monetary stability. The CBB manages foreign exchange reserves to support the peg and sets interest rates for the domestic banking system.
Regulatory Sandbox
The CBB established one of the first regulatory sandboxes in the Middle East in 2017, allowing fintech companies to test innovative financial products under supervised conditions. This initiative supports Bahrain’s positioning as a regional fintech hub.
Role in Vision 2030
The CBB is central to the Bahrain Economic Vision 2030’s financial services objectives. The vision identifies financial services as a pillar sector for economic diversification, and the CBB’s regulatory quality, international reputation, and openness to innovation directly influence Bahrain’s ability to attract and retain financial institutions. The CBB’s regulatory framework is Bahrain’s primary competitive asset in the Gulf financial services rivalry with Abu Dhabi’s ADGM and Dubai’s DIFC.