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Sun 14 Feb 2010 06:57 PM

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Bahrain to tighten banks' credit exposures

New regulations include new definitions of credit underwriting and caps on bank exposures.

Bahrain to tighten banks' credit exposures
TIGHTER LIMITS: Bahrains central bank said that it would be introducing tighter limits on banks credit and asset exposures. (Getty Images)

The Central Bank of Bahrain (CBB) launched a consultation process on Sunday with banks aimed at introducing tighter limits on banks' credit and asset exposures.

The CBB said in a statement on its website it plans to introduce an upper limit on commitments to underwriting securities or syndicated loans of 30 percent of banks' capital for a period of 90 days.

The regulator that oversees a regional banking centre also said it plans to introduce tighter limits on banks exposures to directors and associated companies.

The aggregate limits on this will fall to 25 percent from 40 percent for conventional banks, while the limits for Islamic banks will also be tightened.

The proposed new regulations also include a new definition of credit underwriting and caps on banks' temporary exposures to assets they plan to securitize or place with investors.

Banks will not be allowed to have exposure to such assets for more than 90 days and the exposure can not exceed 25 percent of their capital base.

The placement of real estate projects and private equity deals with investors has been the main revenue source for many of Bahrain's investment houses during an oil-fuelled regional property boom that ended 2008.

Banks licensed by the CBB can submit responses to the consultation paper until March 10. (Reuters)

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