The Central Bank of Bahrain issues guidelines on loan deferral and liquidity support program in Bahrain

On 14 April 2026, the Central Bank of Bahrain (the “CBB”), the sole regulator of the financial services sector in Bahrain issued guidelines on loan deferral and liquidity support program (“Loan Deferral Program”) (the “LD and LSP Guidelines”) aimed at supporting Bahrain’s economy and financial sector.

Applicability:

Retail banks, financing companies and micro finance companies are required to comply with the LD and LSP Guidelines and these guidelines apply to retail and corporate customers.

Effective Date:

The LD and LSP Guidelines direct loan deferral and liquidity support measures to take effect from 19 April 2026.

Measures under the Loan Deferral Program: 

The program provides for a three (3) month deferral of domestic loan installments and credit card payments, applied to the next three (3) scheduled installments (principal and profit/interest) from 19 April 2026.  Profit/interest may continue to accrue during the deferral period, but no fees, charges, or administrative costs may be imposed on customers. The current profit/interest rate must remain unchanged throughout the deferral period.  Deferred amounts are to be repaid solely through a tenor extension, with no increase in the installment amount. 

Exclusions:

Certain facilities are excluded from the loan deferral program, including facilities under ongoing legal proceedings, international syndications and Stage 3 loans not in the cooling-off period.

Risk treatment:

The migration threshold from Stage 1 to Stage 2 is relaxed from 30 to 74 days past due. The three (3) month deferral itself shall not trigger a Significant Increase in Credit Risk (SICR) or a change in IFRS 9 staging, such assessments shall be driven by borrower specific credit risk factors.  This risk treatment is valid for six (6) months.

The intention behind the LD and LSP Guidelines is to extend timely relief given the prevailing circumstances in the region. It is to be seen if the applicability of the LD and LSP Guidelines will extend beyond the recommended time period.

Liquidity Support Program: 

For a period of six months, the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) requirements are reduced from 100% to 80%. The reserve requirement (relating to reserves maintained with CBB) is reduced from 5% to 3.5%.  The CBB will also offer retail banks a repo liquidity facility against eligible collateral for three (3) months at market rate.

Reduction in the reserve requirement will provide licensees with much-needed liquidity to implement the measures under the LD and LSP Guidelines. Licensees will also have the option to avail a repo liquidity facility from the CBB for a period of three (3) months to ensure smooth implementation of the LD and LSP Guidelines.

Action required to be taken: 

Prior to the 19 April 2026 effective date, as a CBB licensee, you must inform your customers of the deferral commencement date and clearly communicate the opt-in process, including all steps required to apply for the deferral. You must provide your customers with a clear written comparison showing:

• the current versus revised maturity date,
• the total profit/interest payable (with any additional amounts clearly identified), and
• all other material information including any additional insurance costs.

The deferral may only be implemented after the customer provides explicit consent in written or electronic form, and licensees must retain appropriate records of disclosure of required information to the customer and obtaining of customer consent.

How can we help?

Our banking and finance team can assist with these LD and LSP Guidelines and the impact on any facilities in place including any amendments to be made to existing documentation and generally advice on these guidelines.