CBB launches inter-bank repo as liquidity management tool

MANAMA: The Central Bank of Bahrain (CBB) has launched Interbank Repurchase (inter-bank repo) as a new liquidity management tool for the government’s conventional securities denominated in Bahraini dinars.

Through an inter-bank repo transaction; a bank which requires liquidity can sell its government securities to another bank which provides liquidity for a pre-defined period and an agreed price.

On the repo closing date, the system will automatically execute the closing leg to return securities to the original deliverer and funds to the original receiver (payee).

The transfer and settlement of securities and the transfer and settlement of funds occurs through the Scripless Securities Settlement (SSS) system and the Real Time Gross Settlement system (RTGS) operated by the CBB.

The new tool will help conventional retail banks borrow from the local market at lower interest rates and with the guarantee of the securities as a collateral.

It will also allow for investing excess liquidity at a lower risk.

Offering this type of liquidity management tool will help in improving the money market and liquidity in the domestic market.

Source: http://www.gdnonline.com/Details/445030