Reserve Requirements

All commercial banks operating in the Kingdom of Bahrain are required to maintain reserves deposited at the CBB amounting to 5% of the value of non-bank deposits denominated in Bahraini dinars. The CBB determines from time to time the amount and form of the reserves through its Monetary Policy Committee. The reserves are not remunerated. The required reserves are held at specific reserve accounts at the CBB and cannot be used for other purposes. The reserve requirement system contributes to adjust the CBB's structural liquidity situation vis-à-vis the banking sector.

The reserve requirement of each commercial bank is calculated by the CBB on a monthly basis from data provided by the banks at the end of the previous month. The CBB administers the necessary fund transfers between the commercial banks' clearing account and reserve account in order to ensure that the 5% requirement is maintained at all times.