On the face of it, the December 2011 launch of Hassan Jarrars tenure as chief executive of Standard Chartered Bank in Bahrain could not have come at a much more delicate time.
Tensions in the Gulf financial centre were still running high following anti-government protests which had started in the early part of the year. Some banking institutions were rumoured at the time to be pulling out of the kingdom. And nobody quite knew which direction the troubled global economy and financial systems were heading.
But while he admits the situation he encountered in Bahrain was not ideal, Jarrar suggests he inherited a position of strength, particularly compared to his counterparts at other international banks operating in the region.
Some of our competitors had to deleverage their balance sheets, and contract their operations in non-core regions like the Middle East to concentrate on their home markets, he explains in an interview in his Manama office.
Approximately 90 per cent of Standard Chartereds profits come from Asia, Africa and the Middle East, but we dont really have a home market per se - our home market is wherever we have operations, whether thats Bahrain, Hong Kong, Angola or any of the other global markets we serve, he adds.
Jarrar came to the job acutely aware of its historical implications, for both the bank and Bahrain.
Standard Chartered became Bahrains first ever bank in 1920, at a time when rudimentary money lending services were being provided by wealthy local families. Assuming the position of a quasi-central bank, Standard Chartered played a key role in formalising the countrys financial services sector, helping establish some of the rules and regulations which would eventually provide the foundations for its rise to a regional financial services hub by the 1970s.
Jarrar says while recent events in Bahrain have not been helpful to its banking industry and reputation, he believes no other country would have weathered the storm as successfully, and puts that squarely down to its robust legal and regulatory framework.
Bahrain has always been ahead of its time in terms of its legal and regulatory environment. Together with its strategic geographical location, forward-looking central bank and talent pool, its credentials as a financial hub, although diminished slightly, remain strong with more than 400 financial institutions still operating here, he states.
In mid-2012 Standard Chartered was one of four lead arrangers, along with J P Morgan, Citigroup and Gulf International Bank, of a $1.5 billion, 10-year Bahrain bond, the strong performance of which, Jarrar claims, proves the kingdoms enduring investment credentials.
Bahrains biggest Achilles heel is its BBB rating, he admits. If it was a notch higher it would be better. Previous Bahrain bonds and sukuk have served investors very well in the past - the coupon on them has been attractive, and they have traded at a premium.
Whether they [the credit ratings agencies] will upgrade Bahrains sovereign risk rating is up to them, but I still believe the kingdom is a much more stable opportunity than many other countries who share the same rating, he adds.
The fact that Standard Chartered was part of the arranging team for the Bahrain bond reflects the hybrid role it is playing as it moves away from core corporate banking services.
A bank like Standard Chartered needed to become a hybrid institution - we are no longer just a commercial or corporate bank. We provide investment banking services in response to the needs of some of our clients, and if the government needs our assistance in issuing bonds we step in, says the wholesale banking specialist, who in a 29-year career has also served as the head of origination and client coverage for wholesale banking at Standard Chartered in the UAE, following senior positions at Abu Dhabi Commercial Bank and Mashreq Bank in the Emirates.
As regional economies advance then large Middle East organisations - the vast majority of which still depend on traditional corporate banking services - are moving towards capital markets in a similar way to their counterparts in the US or Europe. We will see more bond issuances, he suggests.
While acknowledging banks can expect little sympathy following the spate of high profile international scandals since 2008 Jarrar admits the regulatory changes which have been sweeping the industry in response could stir further public disquiet.
Of course banks have become the whipping boys. Some [banks] have made grave mistakes but the majority still follow the rules and are still liquid; the majority of bankers dont make millions, and the majority of bankers dont exceed their authority. But they dont make the headlines.
However, the biggest risk to our business now is not credit default or companies going bust - it is the avalanche of regulation we must now contend with, which was originally a kneejerk reaction to a problem in the US with home mortgages and which has since mushroomed.
Regulators are becoming more sophisticated, tougher, more intrusive and more communicative with each other. Regulators in countries around the world will generally comply with whatever the big brother authorities like the [UKs] FSA or the [US] Federal Reserve dictate.
This puts a lot of burden on banks to put more resources into audit, compliance, risk management and risk assessment functions. This increases the costs of banking - and these costs must ultimately be passed on to the customer.
In my opinion, banking services costs, especially margins on loans and fees, have to increase in this environment.
Jarrar suggests that recent calls from some economists for even more bank regulation, particularly in the wake of the March meltdown of Cyprus banking system, are also misplaced.
If we talk about more regulation do we look at risk assessment, fees, pricing and compensation? Where do we draw the line? There is a fine line where the free economy is allowed to work and where the consumer is able to make their own choices.
Regulations are necessary but they must not interfere in providing value added service to an economy. We must avoid a situation where central banks are running banks completely.
Despite this, Jarrar says he is proud of the high level relationship both he and Standard Chartered enjoy with Bahrains central bank. He was the only executive from a financial institution invited to participate in a recent high level delegation to the UK to promote Bahrain.
It is a relationship of respect and compliance, but we dont take it for granted, he says. We cherish the fact they [the central bank] see us as thought leaders in the market.
Jarrar says the relationship with Bahrains financial regulatory authority is strengthened by the banks wide reaching local corporate social responsibility (CSR) programmes.
Our brand promise is here for good and this brings with it a range of social responsibilities. We make money from the countries in which we operate and we are acutely aware that we need to give back to these countries. We donate money, and our staff donate their time - every bank employee must clock at least three days volunteer work every year and this is subject to evaluation by the group.
Last month the bank hosted two coaches from Liverpool Football Club in the UK on a regional tour including Bahrain, Qatar and Oman, benefitting about 400 children. Standard Chartered is also helping improve financial literacy in a region where public knowledge of products, services and terminology is still relatively poor.
Improving financial literacy is not about giving someone a fish - it is about teaching someone to fish, says Jarrar. The majority of high school and university graduates leave school without the ability to balance a cheque book, they dont know the difference between a stock or a bond. It is incumbent upon us to impart that knowledge.
If the last 17 months of his tenure have been a learning curve, Jarrar is taking it all in his stride as he looks to build on Standard Chartereds standing in Bahrain. Banking is in his blood, his father having been a career banker. And despite the public perception of and trust in his chosen profession being at an all-time low, he insists it remains an honourable and enjoyable way to make a living.
It is a good business to be in if you do it right and you dont lose sight of what you are doing. You are here to help people manage their money and better their lives. Youre helping a small business to expand. Youre here to say no as well as yes, even if saying no costs you money.
If you think the loan or facility the customer is applying for does not suit them, you must have the courage to say sorry, Im against it.
Such an open and frank level of engagement has clearly served Standard Chartered Bahrain well over the years, to the extent that Jarrar feels the bank is an integral part of the countrys fabric and society.
I joke that in the local culture anybody who finds a marriage suitor for their daughter should first check the guy out with Standard Chartered, because we touch the lives of so many individuals, corporations and SMEs.
