Political tension looks likely to end Bahrain’s claim to be the Gulf’s financial centre. It might also lead to debt restructuring and defaults among already struggling investment banks headquartered on the island, especially the Islamic ones.
As far as the global bulge bracket is concerned, French banks BNP Paribas and Crédit Agricole are the only firms still maintaining regional bases in Bahrain rather than in Dubai. With France having advised its citizens against travel to Bahrain since February, Dubai will look even more attractive for these institutions.
After protests by Bahrain’s Shia majority escalated on March 13, international banks were forced to evacuate staff to Dubai and beyond, although expatriates working for local and regional institutions have largely stayed. With the UK perhaps the largest source of the white-collar labour on which the banking sector relies, the UK Foreign Office advised against travel to Bahrain, even for business.
One banker says protesters blocked the area around the central bank at the height of the unrest, forcing the banks to conduct business from a disaster recovery site – as did the central bank itself. Standard Chartered and HSBC, the main international banks operating in the local retail market, closed their branches.
