...We expect deterioration in asset-quality indicators to remain contained as the Bahraini economy recovers from the pandemic, thanks to higher oil prices and increasing regional economic activity. At the height of the pandemic, regulatory forbearance measures helped the corporate and retail sectors cope with the negative effects and limited the increase in nonperforming loans (NPLs). However, we still believe that provisioning requirements will remain higher than before the pandemic as some sectors (such as CRE and hospitality) might take longer to recover. The Central Bank of Bahrain (CBB) has demonstrated adequate authority over onshore banks, largely owing to its high capital standards and implementation of international regulations. That said, Bahraini retail banks are in a net external liability position that could prove vulnerable to domestic or regional stresses. Net external debt weakened to 20.4% of systemwide domestic loans at end-March 2022, compared with 12.8% at year-end 2020....
