CBB introduces overnight credit/deposit facility for banks

As of the start of 2007, the CBB has introduced an overnight deposit and overnight lending facility to enable banks to better manage their short term liquidity positions. The CBB has, at the same time, withdrawn previously-offered facilities of 3-month and 6-month tenors.

'The CBB has restructured its position with regard to the standing facilities it offers on the lending and deposit side to Bahrain's commercial banks,' said Dr Abdul Rahman Saif, Executive Director, Banking Operations, at the CBB.

'We have decided to consolidate our position on short term tenors, in line with the trend among central banks globally and to follow a more market-oriented approach.'

The CBB consulted with banks in Bahrain prior to introducing the new overnight facility.

With this, the standing facilities offered by the CBB on the deposit side are of overnight, one-week and one-month tenors, and of overnight and one-week tenors on the lending side.

All commercial banks operating in Bahrain have access to the overnight deposit and lending facilities, the trading of which starts at the end of the business day.

The move to restructure the type of instruments offered by the CBB is a key component of CBB's plan to make the Bahrain money market framework more market-oriented and transparent. In December 2006, the CBB effected the consolidation of its treasury and foreign exchange (forex) operation.

The CBB also initiated the establishment of the Bahrain Money Market Forum (BMMF), aimed at providing a platform for discussion on market development and structural issues and enhancing transparency in the BD money markets.