Bahrain fundamentals strong says cbank

Tuesday, 22 February 2011 00:01 - - {{hitsCtrl.values.hits}}

Manama, Reuters- Bahrain’s banking system is operating normally and economic fundamentals remain strong despite unrest, the central bank said, adding it would provide all necessary support to banks if needed.

“All financial transactions are at the normal level and the dinar continues to trade at the same level,” the central bank said in a statement after a meeting with retail banks heads.

Bahrain like most Gulf states links its dinar to the US dollar with the peg set at 0.376.

The peg limits flexibility of Bahrain’s monetary policy as the central bank needs to keep interest rates close to US benchmarks to avoid excessive pressures on its currency.

Central Bank Governor Rasheed Al Maraj also assured bankers on Sunday that the monetary authority would continue to cooperate and support banks and provide all necessary support to facilitate banking operations, the statement said.

Political protests in the kingdom have sent default protection costs up over the past week.

“It is normal following any political or economic development that the credit rating agencies would review the ratings,” Al Maraj said.

“However, we believe that the economic fundamentals of the Kingdom of Bahrain remain strong and that the short term economic and political developments should not entirely reflect on the review,” he said.

Moody’s, which downgraded Bahrain’s sovereign rating last year, said on Sunday it was concerned about continuing unrest in Bahrain and was monitoring the situation closely.