The Central Bank of Bahrain (CBB) manages the Kingdom of Bahrain’s foreign reserves according to CBB’s investment policy. The objectives include:
- Ensure high level of liquidity available
- Preservation of capital
- Enhance returns yet maintain a risk averse portfolio
- High aggregate portfolio quality
- Maintain the Bahraini Dinar parity
Foreign reserves are managed based on CBB’s investment policy where dedicated guidelines are set for each portfolio according to its type and purpose. The guidelines determine the eligible range of instruments, markets, and exposures.
To ensure that sufficient liquidity is available to meet the projected demand, the CBB places part of its foreign reserves in a liquidity portfolio consisting of deposits with banks both locally and internationally. While other portfolios consist of debt securities of high credit in eligible markets.
Reserves are managed both internally and externally; the portfolios managed with external asset managers follow an ‘Investment Guideline’ similar to portfolios managed internally. The CBB selects its external asset managers according to the following criteria:
- A leader in in the asset management business
- A track record in managing portfolios similar to the CBB’s mandate
Reserve Management Committee
The Reserve Management Committee (RMC) is headed by His Excellency the Governor, while the Executive Director of Banking Operations is the deputy and the Director of the Reserve Management Directorate (RMD) is a permanent member. Members of the committee include the investment team at the RMD and other relevant staff members. The RMC ensures that the objectives are implemented in the best manner. This committee plays an important role in the development, implementation, and monitoring of CBB’s policy, strategy, and investment. The Committee meets regularly and whenever necessary to discuss and analyze the performance of the portfolios and set future investment objectives.