Bahrain emergency fund 'unlikely', says central bank

GLOBAL IMPACT: Off-shore banking centre Bahrain has admitted possible exposure to Lehman Brothers. (Getty Images)

Central Bank of Bahrain is unlikely to create an emergency fund to back up local banks in case any lender is struck by credit difficulties stemming from the US financial crisis, a senior regulator said on Tuesday.

"We don't have liquidity problems here,'' Khalid Hamad, Executive Director of Banking Supervision at the CBB, told newswire Bloomberg.

"We've conducted a survey after the US financial crisis and found positions of local banks are sound."

He added it was difficult to predict any losses, while there might be some exposure to Lehman Brothers Inc. in Bahrain.

"Local banks made record profits in the first half of the year and their capital, balance sheet and reserves are well positioned to cover any unforeseen losses,'' Hamad said.

The interbank market in Bahrain is improving every day now after a "difficult situation'' last week and the central bank won't intervene in the market since banks have sufficient reserves, he said.

The United Arab Emirates on Monday said it would to set up a 50 billion dirham ($14 billion) fund to support banks operating there, while Kuwait said it was reviewing liquidity in its banking system and would inject money in the local market if required.

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