The standing facilities are a set of deposit and lending instruments. The CBB offers the following standing facilities:
• Overnight deposit facility
• 1-week deposit facility
• Overnight lending facility against Bahraini dinar deposits at the CBB
• Overnight repo facility against government securities
• 1-week Islamic Sukuk Liquidity Instrument (ISLI) against Government Ijara Sukuk.
The mechanism of the Islamic Sukuk Liquidity Instrument (ISLI) is based on Sale and Purchase transactions meant to help Islamic banks in managing their liquidity. It involves three separate Sukuk sale and purchase transactions requiring the existence of three parties, namely the Sukuk owner (the bank in need of liquidity), the intermediary bank (the market maker) and the Central Bank of Bahrain (CBB) which offers the liquidity.
The standing facilities are available to retail banks, at their discretion, at the end of the daily trading session (after 1 p.m.). Access to the 1-week deposit facility is granted only on Tuesdays (or if Tuesday is a bank holiday, on the following business day).
The interest rates on the standing facilities are the CBB policy interest rates. The 1-week deposit rate is the CBB Key Policy Rate. The 1-week deposit rate often constitutes the midpoint of an interest rate corridor within which short-term market interest rates fluctuate. The overnight deposit rate serves as the lower boundary of the interest rate corridor and the rate on the lending facilities serves as the upper boundary of the interest rate corridor.
The CBB rates are decided by a Monetary Policy Committee at the CBB. They are posted on a daily basis on the CBB website; they are also disseminated through the Reuters and Bloomberg information service on its CBB page (which Reuters and Bloomberg users can find by entering the code ‘CBOB’). The policy interest rates are updated at 10 a.m. each business day.