Bahraini.TV

Bahrain central bank head sees recovery signs

by mahmood on 17/12/09 at 6:24 pm · email  · print  

Despite an early intervention by governments, the global economy has not yet fully recovered. However, the signs of recovery are there and the situation is immeasurably better than a year ago, said a senior official at the central bank.

Central Bank of BahrainCentral Bank of Bahrain
Central Bank of Bahrain
CBB
Bahrain | Financial Services
News | Profile | Officers
» Research
Gov. Rasheed M. Al-Maraj told the 11th Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) that the bankruptcy of the Lehman Brothers had cast a dark cloud over the world financial system and the global economy.

The two day-conference, which concluded on Tuesday, was held in cooperation with the World Bank under the auspices of the Central Bank of BahrainCentral Bank of Bahrain
Central Bank of Bahrain
CBB
Bahrain | Financial Services
News | Profile | Officers
» Research
.

Al-Maraj said the recent events have certainly created a great opportunity for the Islamic financial industry. He added that the Islamic finance industry has been sheltered from the impact of the crisis in part because the Shariah prohibits the excess leverage and speculative financial activities that were at its root. “They also take comfort from the fact that many participants in conventional finance, as well as regulators, and policy-makers have begun to ask whether there are lessons to be learned from the principles of Islamic finance which might help avoid future crises,” he added.

Al-Maraj said the start of the financial meltdown was widespread risk aversion in financial markets for a period of several weeks and the reluctance of banks to lend to each other creating a vicious downward spiral.

As a result, he said, the banks that were unable to raise wholesale funding were forced to cut back on their lending.