New Era for Bahrain Banking: Secured Transactions and Netting Laws Explained

3 min 8 sec January 16, 2026 (Edited)

Introduction

Bahrain has established itself as a regional leader in developing regulatory frameworks designed to support economic growth and innovation. In recent years, regulators have introduced a series of initiatives aimed at strengthening institutional transparency, improving regulatory efficiency, and promoting greater private-sector participation. These measures reinforce Bahrain’s broader commitment to fostering a conducive business environment that aligns with international standards while furthering the objectives of Economic Vision 2030.

Further reforms are anticipated in 2026, with a particular focus on the banking sector. This article provides an overview of these anticipated changes and their potential implications for Bahrain’s economic landscape.

Secured Transactions Law

Bahrain has approved a comprehensive Secured Transactions Law establishing a unified, modern framework for creating, perfecting, prioritising, and enforcing security rights over movable assets. The legislation comprises 60 articles and forms part of a broader governmental program to strengthen Bahrain’s financial infrastructure and legal environment, enhance transparency, and align with international best practice. It is also geared toward supporting Bahrain’s performance under the World Bank’s evolving Business Ready (B–READY) framework through more efficient collateral regimes and clearer creditor protections. The law has been approved by the Shura Council following prior parliamentary clearance, with a formal final vote noted as forthcoming; implementation will depend on the issuance of executive and technical regulations, including the operationalization of the electronic registry.

At its core, the law recognises and governs a broad conception of a “Security Right” over movables, regardless of form, including fiduciary transfers of title, finance leases, retention-of-title sales, transfers of receivables, and acquisition financing arrangements. It defines key parties, assets, and returns, and allows general or specific descriptions of collateral and obligations, enabling coverage of present and future assets and revolving or contingent obligations.

The final version of the law is expected to be promulgated in due course in line with a regional push to introduce laws enabling the creation of security over assets.

Netting Law

As part of the CBB’s objective of enhancing its regulatory framework, the CBB has circulated the draft Netting Law for consultation on 12 December 2024. The draft Netting Law is based on the International Swaps and Derivatives Association (“ISDA”)’s Model Netting Act which will supersede Resolution No. 44 of 2014 with respect to promulgating a Resolution for Close-Out Netting under a Market Contract (“Netting Regulations”).

The implementation of the draft Netting Law will provide greater legal certainty for financial institutions and market participants in Bahrain. By clearly defining the enforceability of netting agreements and the treatment of collateral, the law is expected to reduce legal risks and enhance confidence in the financial market.

The draft Netting Law aligns Bahrain’s legal framework with international standards and best practices for netting and collateral management. This alignment will enhance Bahrain’s reputation as a well-regulated financial center and facilitate its integration into the global financial system. By addressing Shari’a compliance, the law is expected to support the growth of Islamic finance in Bahrain. Financial institutions offering Shari’a-compliant products will benefit from the legal clarity provided by the law, promoting innovation and development in the Islamic finance sector.

The legal certainty and robust framework provided by the draft Netting Law is expected to make Bahrain a more attractive destination for foreign investment. International investors and financial institutions are expected to have greater confidence in entering into financial contracts and transactions in Bahrain.

Bahrain’s banking agenda of legal and regulatory reforms is expected to enhance fiscal sustainability, attract private investment in key sectors, and foster human capital development. The overarching vision is to transform Bahrain into a diversified and competitive economy that provides opportunities for all. By implementing these reforms, Bahrain is expected to be better positioned to face the challenges and opportunities and lay a solid foundation for its ambitious goals for 2026 and beyond.