A Bahrain court ruling has supported the decision of the Central Bank of Bahrain (CBB) to place Awal Bank into administration.

The CBB said the ruling in its favour came following an appeal launched by the former chairman of Awal Bank against the decision made by the central bank on July 30 last year to place Awal Bank into administration.

The ruling supports the CBB's decision to place Awal Bank into administration due to Awal Bank's defaults on certain of its obligations in June last year, under Article 136 of the Central Bank of Bahrain and Financial Institutions Law (Decree No 64 of 2006).

Since Charles Russell, the Bahrain and London-based law firm, was appointed as external administrator, together with Baker Tilly Restructuring and Recovery, both worked in close co-ordination with the CBB to instigate a process of asset realisation and has initiated legal proceedings across a number of jurisdictions, including Bahrain, London, New York, Saudi Arabia and the Cayman Islands.

These activities will continue to be driven forward following the ruling.

'The priority of the CBB is clearly to maintain the strength and reputation of the Bahrain banking sector, and given the circumstances, we were ultimately left with no other option except to appoint administrators, CBB executive director of banking supervision Khalid Hamad said.

'The ruling clearly validates our decision and we will continue to support the independent administrators.

'Their priority is the realisation of Awal Bank's assets, for the benefit of all stakeholders and creditors, through all available means,' he added.

'The CBB has worked closely with Bahrain's financial sector to help it through the inevitable fallout from the global financial crisis,' CBB executive director of banking operations Shaikh Salman bin Isa Al Khalifa said.

'Our aim throughout has been to maintain financial stability in the kingdom and the decision to place Awal bank into administration should be viewed in this context.

'Maintaining financial stability, when combined with a supportive business environment, means that the financial services sector in Bahrain continues to enjoy a positive outlook.

'In the last three years, employment in banking and financial services as a whole rose by 16 per cent, now totalling around 14,000 employees, a clear illustration of the ongoing progress being made.

'Importantly, from Bahrain's perspective, around two-thirds of the employees in the financial services sector are Bahrainis,' he added.

'During its 40 years as the financial centre for the Middle East region, Bahrain has weathered a number of storms and yet emerged from each in a stronger position,' CBB Governor Rasheed Al Maraj said.

'The reputation that we have built as a well-regulated and transparent financial centre is important to us and we will continue to defend it.

'This means that, when necessary, we will make the difficult decisions required, such as placing Awal Bank and TIBC into administration.

'I have no doubt that these decisions were the right ones and in the best interest of Bahrain's financial sector.

'They ultimately mean that once again Bahrain's financial services sector will emerge from the downturn stronger than before,' he added.-TradeArabia News Service