Bahrain Trust Registry Becomes Operational

by Phillip Morton, Investors Offshore.com

09 November 2007

The Central Bank of Bahrain (CBB) has announced that the CBB Trust Registry Office is now fully operational.

The CBB Trust Registry Office is a specially-created restricted area, which houses the documentation required by the CBB for the registration of trusts by approved trustees.

The establishment of the secure CBB Trust Registry Office is a fundamental requirement of the Trust Law, which provides the legal foundation for the creation and administration of financial trusts in Bahrain.

“Following the enactment of the Trust Law, the CBB is putting in place all the processes and procedures required for the full implementation of the law,” explained Mohammed Ayman Al Tajer, Director of Financial Institutions Supervision at the CBB.

“Since trust deeds are highly confidential documents, the CBB is taking all appropriate measures to ensure not only the physical security of such documents but also ensure that their secrecy is not compromised,” he added.

Earlier, the CBB issued regulations related to the licensing procedures and conditions for undertaking financial trustee activities.

Trusts are a fairly new phenomenon in the Middle East, although such arrangements are a widely used mode of wealth preservation in developed countries, Mr Al Tajer pointed out.

With the wealth of the region’s high net worth individuals estimated at US$1.3 trillion, and forecast to grow to US$1.8 trillion by 2010, there is tremendous potential for services aimed at wealth preservation and succession planning.

“Many of the region’s wealthy, whether individuals or business groups, are sophisticated investors, who are willing to embrace innovative products and wealth management solutions utilising the trust as a structure,” observed Mr Al Tajer.

He continued: “The creation of a trust, in a well-regulated environment such as Bahrain, will broaden the available options for the transfer of business, property or other assets from one generation to another.”

Dr Graham Journeaux, Chairman and Chief Operating Officer of Bahrain-based Ohad Trusts, suggested that trust arrangements can be particularly useful for corporates and large conglomerates in the Middle East region.

“The trust vehicle can provide an additional comfort level for financial instruments, such as sukuk (Islamic bonds), mutual funds and securitization structures, by segregating the assets from the issuer’s counter-party risks,” he explained.

The inclusion of a party (the trustee) independent of the promoter can also create additional confidence in the instrument.

Corporates may also utilise the trust arrangement to protect employee funds, due for payout in the future, against a decline in the company’s fortunes.

“We also see the trust vehicle as particularly useful in providing clarity of succession, particularly in the region’s large family businesses, which have today reached second or third generation of ownership,” concluded Mr Journeaux, whose firm specializes in corporate and trust administration services for large corporate transactions and private client structures.

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