Bahrain plans to raise guarantee on deposits

Bahrain is looking at raising the guarantee on bank deposits to a maximum of BD20,000 (Dh194,880) from BD15,000, said its central bank governor. « The governor of Bahrain central bank unveiled plans to raise the guarantee on bank deposits of commercial banks in Bahrain to BD20,000 from BD15,000, » said Rasheed Al Maraj. « The transactions of banks in Bahrain are stable, with regards to the level of liquidity, » he said in a speech to a Bahraini business group. Since 1994, Bahrain has guaranteed up to 75 per cent of deposits, to a maximum of BD15,000. Maraj also said the central bank is working on changing the current scheme so customers can collect their deposits from a central fund into which banks have injected money beforehand. Under current rules, customers would be forced to seek their guaranteed deposits from other banks, in the event of a bank failure. « This takes time, and one of the lessons of the recent financial crisis is that it is important that depositors should be compensated promptly after their bank fails, » Maraj said. Standard Poor’s Ratings Services yesterday said it had affirmed its « A » long-term and « A-1 » short-term sovereign credit ratings for Bahrain. The country’s outlook is stable. « The ratings on Bahrain reflect the government’s net financial asset position and strong international alliances, » S&P’s credit analyst Remy Salters said. « These factors provide a counterbalance to high geopolitical risks [relative to the majority of other rated sovereigns], the Bahraini economy’s vulnerability to external shocks, and the secular decline of its hydrocarbon resources. » « Based on deposits, minority stakes in quoted companies, and other financial assets, we estimate the general government’s net asset position at 25 per cent of GDP in 2008. This is sharply down from estimates of about 65 per cent a year ago, owing to the inclusion of only the most liquid assets, as well as past opacity on the composition of asset holdings. « Oil revenues were budgeted on the basis of a $40 oil price in 2008, and S&P’s expects budget surplus (including extra-budgetary expenditures) of five per cent of GDP. According to our forecast, fiscal surpluses will decline to 2.2 per cent of GDP in 2009 and an average of 0.7 per cent in 2010-2011. » (With inputs from Reuters)