MANAMA: The Central Bank of Bahrain (CBB) is not prepared to bail out banks that are part of the country’s offshore banking center, its governor said in remarks published on Monday.
“We have been very clear over the years that the primary responsibility for supporting the wholesale banks resides with their shareholders — that was our clear expectation, for example, with TIBC and Awal,” Rasheed Al-Maraj told the United Arab Emirates’ The National newspaper. “The CBB would not, for example, expect to act as lender of last resort.”
The central bank seized control of The International Banking Corporation (TIBC) and Awal Bank in July, owned by troubled Saudi groups Algosaibi Ahmad Hamad & Bros. (AHAB) and Saad Group respectively, after both failed to meet some of their debt obligations.
The CBB terms as wholesale banks Bahrain’s off-shore banking sector that caters to channeling the region’s oil money, in particular from neighboring Saudi Arabia, into investments in the West and in the region.
Bahrain is a small oil producer and is generally not considered as having the financial clout to bail out its offshore banking sector.
Analysts and the central bank have said that the liquidity situation of its domestic banks has remained very sound throughout the global financial crisis, even though they posted lower profits or losses as they booked provisions on bad loans as a result of the regional slowdown in economic growth.
