Bahrain to discuss bank regulations with US Treasury

MANAMA: Bahraini authorities will discuss with the US Treasury the problem of international banks becoming reluctant to deal with banks in Bahrain and the Gulf because of tight US regulation, Bahrain’s central bank governor said on Tuesday.

“Many international banks have curtailed their correspondent services with regional and local banks. Some of the banks have refrained from dealing with exchange houses,” Rasheed Mohammad Al Maraj told a business conference.

“This has affected a wide sector of the population, especially the expatriates.” Al Maraj said officials in Bahrain, one of the Gulf’s financial centres, had met US Treasury officials last November and planned another meeting on the issue in April.

US regulations, part of a tougher regime introduced since the financial crisis, include scrutiny of potential tax avoidance and anti-money laundering rules.

These have imposed extra costs on US banks, prompting many to reduce the number of foreign institutions with which they do business, and making international banks operating in the United States more wary of ties with the Gulf.

Some banks in the Gulf have been under particularly close scrutiny by US authorities because of a drive to curb financing of Islamist militancy and flows of money to Iran.

UAE central bank governor Mubarak Rashid Al Mansouri complained of the problem in December, saying it had become harder for UAE banks to obtain dollar clearance services — the processing of transactions in the US currency.

Al Maraj said Bahrain was engaging with US authorities including the Federal Reserve and the Office of the Comptroller of the Currency, as well as with international banks, to convince them that the compliance standards of Bahraini and Gulf banks were in line with global practices.

“We are hoping they will give us some flexibility ...” he said. “This is a serious issue for us.”

Bahrain reopens bond sale revoked after S&P Downgrade

DUBAI/LONDON

Bahrain reopened a bond sale it annulled last week when Standard & Poor’s cut the Gulf Arab nation’s credit rating to junk a day after they were priced. The country will pay an additional 25 basis points, or 0.25 percentage point, to sell securities due in 2021 and 2026, according to four people familiar with the transaction, who asked not to be identified because the information is private. Bahrain revoked a sale completed February 16 after S&P downgraded it by two levels to BB the following day, citing the “structural frailty” of public finances due to the rout in oil.

At Tuesday’s sale, Bahrain is placing more of its existing 2021 notes at 5.95 per cent, as well as a tap of its 2026 security at 7.65 per cent, according to the people. The pulled offering last week was $750 million (Dh2.8 billion) in size.

S&P lowered Bahrain because its vulnerability to slumping oil prices has increased since 2009 as government expenditures started to rise in response to the global economic slowdown and civil unrest in the country. Preliminary 2015 fiscal data indicate a wider-than-anticipated deficit of about 11.5 per cent of economic output, compared to 10 percent expected previously, the rating company said.

-Bloomberg