The Central Bank of Bahrain (CBB) has launched a massive relief package, including a three-month loan deferral option for residents and businesses, in a major move to safeguard the kingdom’s financial stability.
The initiative follows directives from His Royal Highness Prince Salman bin Hamad Al Khalifa, Crown Prince and Prime Minister, aimed at bolstering the national economy and providing a safety net for the financial sector.
Under the new measures, retail banks and finance companies will offer both individuals and corporates the choice to pause their loan instalments and credit card payments for a period of three months.
This deferral covers both the principal amount and the interest or profit components of the loans. To put the scale of the relief into perspective, the CBB noted that the total value of domestic loans in the kingdom currently stands at BD11.3 billion.
To ensure banks can support their clients without facing immediate penalties, the CBB is allowing institutions more flexibility in how they classify loans for affected customers during this period. This prevents the pause in payments from negatively impacting the banks’ balance sheets or the borrowers’ credit standings.
To ensure the wheels of the economy keep turning, the CBB has committed to a six-month liquidity support programme, providing banks with unprecedented access to cash to keep lending active. The CBB will provide retail banks with unlimited Bahraini Dinar liquidity against eligible collateral, which is currently valued at BD7bn.
In addition to this direct support, the central bank has slashed the mandatory reserve requirement for banks from five per cent to 3.5pc.
Regulatory buffers, specifically the Liquidity Coverage Ratio and Net Stable Funding Ratio, have also been reduced from 100pc to 80pc. These technical adjustments are specifically designed to ‘unlock’ cash within the banking system and push it back into various economic sectors to stimulate growth.
avinash@gdnmedia.bh
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