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Mon 10 Nov 2008 11:18 PM

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Bahrain banks real estate exposure below 30% - cbank

Kingdom's banks' sectoral exposure in line with proposed guidelines.

Bahraini banks' exposure to the real estate sector is below 30 percent, the Gulf Arab state's central banker said on Monday, in line with a new regulatory cap on sector financing that is under discussion.The central bank is in consultations with banks over the regulations, to curb their exposure to the sector.

While most of the region's banks were spared from the immediate fallout of the US subprime crisis, their exposure to the local real estate market has raised concerns as the sector shows signs of a slowdown.

The central bank's latest draft - to form the third and last round of consultations with banks - puts the maximum share of real estate financing that Bahrain's banks can have in their gross financing portfolio at 30 percent.

Asked whether their current exposure topped that level, Governor Rasheed al-Maraj replied: "It's not too much, it's below that.

"We have not really decided which level exactly [we will implement]," he added, speaking on the sidelines of a banking conference."Obviously we don't want to create a sudden negative impact."

The central bank's latest draft also caps banks' direct and indirect real estate investments at 40 percent of their capital base.

Maraj said the central bank had received a "mixed" response from banks but declined to elaborate. Asked whether the central bank still plans to implement the new regulations on Jan. 1, 2009, Maraj said "that depends on the progress we make". (Reuters)