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Q1: Why Bahrain opts to use LC for conduct of its
international trade?. Is LC trader's choice for risk management or the
country's choice for trade and exchange regulation?
It is one of choices of the trader's. Like
everywhere else it oils the trade flow along with documentary collection.
There is no exchange regulation in Bahrain. Banks have to adhere to
anti-money laundering guidelines, which are modeled after FATF's 40+9 rules.
Q2: How has Bahrain
developed LC expertise? Is Bahrain's LC market competitive?
Bahrain was one of the first in the gulf to devote
considerable energy and attention to local human resources development. The
country has a huge pool of educated local population. Most of them need a
job to keep themselves afloat unlike their rich cousins in U.A.E., Kuwait or
Saudi Arabia. This gave the necessary thrust to Bahrainis aspiring for and
assuming positions at all levels in banking including in the LC field. Three
large local banks, Bank of Bahrain and Kuwait, National Bank of Bahrain and
Alhi United Bank have their trade finance operations headed by locals. Most
local banks' LC department is 95% Bahrainized. This is in sharp contrast to
the situation prevailing in Dubai where almost 95% of positions in a typical
LC department are held by expatriates.
As regards competitiveness, there is no cut-throat
competition based on price factor. Every bank has their clients and banks
and customers generally tend to be loyal to each other Large companies do
distribute their business among various banks.
Q3: How Bahrain acquires
ICC information relating to LC?
Bahrain Chamber of Commerce is active in this
respect and circulate any information received from ICC Paris. Besides, the
local bankers training college run several programs on LC and guarantees.
Most banks also send their staff for external training inside and outside
the country.
Q4:
What arrangements Bahrain has for financing LC-based international trade?
This gets done at bank-to-customer level. There is
no (to my best knowledge) any export finance agency providing any kind of
export finance or non-payment risk cover as such.
Q5: Does Bahrain use silent
confirmation?
Yes. There is.
Q5:
Is Bahrain automating LC transactions?
Automation is limited to taking care of internal
processing of LCs and bank-to-bank communication. To my best knowledge,
customers still need to sign a printed application form each time a LC is
required to be opened.
Q6:
How Bahrain resolves LC disputes/recovers overdue LC payments? What
alternative Bahrain considers better - credit insurance claim or litigation?
I am not aware of any LC disputes in Bahrain. If
anything gets referred to Bahrain Chamber of Commerce, it has the necessary
expertise to offer an opinion as the Bahrain National Committee of ICC is
comprised of experienced bankers with substantial in- depth knowledge on the
subject.
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