MANAMA: The first conventional interbank repurchase (repo) transaction denominated in Bahraini Dinars has been executed by the National Bank of Bahrain (NBB) in conjunction with Standard Chartered Bank.
This follows the launch of the interbank repo product by the Central Bank of Bahrain (CBB) for the government’s conventional securities as a part of the regulator’s efforts towards the developing the banking sector, promoting liquidity management and building a liquid and reliable secondary market curve for conventional retail banks.
NBB said in carrying out the first deal of its kind with Standard Chartered, it had created a milestone for the kingdom, as repos are considered an integral factor in developed money and capital markets.
“We are pleased to be part of this key initiative that will ultimately work towards advancing money and capital markets in Bahrain,” said NBB Group chief executive for corporate and institutional investment banking Hisham Al Kurdi.
“Repurchase transactions enhance bank liquidity management and contribute to the development of the secondary markets in securities denominated in Bahraini Dinars, aligning us with developed international markets and maintaining the kingdom’s pioneering capital market position in the region,” he added.
Also commenting was Standard Chartered executive director and head of treasury markets for Mena sub-region Roomi Siddiqui, who said: “In addition to the development of local markets, the initiation of the repo market would provide investors in the government’s debt securities denominated in Bahraini Dinars with greater access to liquidity and leverage.”
The introduction of interbank repo as one of the mainstream products is set to leverage further movement of liquidity within banks and increase activity in interbank transactions.
The step would not only provide an additional source of liquidity to the market, but will also enable funding to be cost-effective.
In addition to helping build a secondary market yield curve, it will also address the long-term funding requirements of the market with a much-reduced credit risk compared to conventional funding.
The CBB has been a longstanding advocate of the development of the repo market, providing the custody and collateral management infrastructure required while facilitating early discussions among banks.
The Bahrain Association of Banks (BAB) has been instrumental in guiding discussion and encouraging implementation among members.
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