CBB announces Repo in inter-bank bond market

The Central Bank of Bahrain has officially launched a new liquidity management tool ‘Interbank Repurchase’ (Inter-bank Repo) for the Government’s conventional securities denominated in Bahraini Dinars. The move, according to CBB, is part of its ongoing efforts towards the development of the banking sector and promoting liquidity management for conventional retail banks.

The tool which allows conventional retail banks to borrow from the local market at lower interest rates and with the guarantee of the securities as a collateral is expected to improve the money market and liquidity in the domestic market. The system also allows investing excess liquidity at a lower risk, the CBB statement said.

In practice, the Inter-bank Repo transaction allows a bank which requires liquidity to sell its government securities to another bank which provides liquidity for a pre-defined period and an agreed price. On the Repo closing date, the system will automatically execute the closing leg to return securities to the original Deliverer and funds to the original Receiver (Payee).

The transfer and settlement of securities and the transfer and settlement of funds occurs through the Scripless Securities Settlement (SSS) System and the Real Time Gross Settlement System (RTGS) operated by CBB.