“We have benefited from having less speculative pressure on our stock market and real estate in the years leading up to the end of 2007, with the result that we have seen amongst the lowest falls in the Bahrain stock market in 2008 compared with other bourses in the region,” he said.

Sheikh Ahmed was speaking at MEED’s Middle East Project Finance 2009 conference in Bahrain on 26 January.

“Bahrain’s real estate sector has only slowed in terms of growth and has not witnessed any significant or material downturn when compared with price levels at the end of 2007,” Sheikh Ahmed said.

He said that the government has given some support to Bahrain’s retail banks, but it had not been obliged to provide capital support to them.

“Support so far has been given to provide short-term liquidity where needed,” Sheikh Ahmed said.

He added that banks in the country remain well capitalised, following a Central Bank of Bahrain decision in 2008 to maintain its asset leverage requirements for local banks at 20 times capital. As a result, banks remain comfortable within the international banking standards issued by the Basel Committee on Banking Supervision.

“The highest leverage ratio of Bahrain retail banks is just over 11 times capital with an average of just over 10 times capital,” he said. “Basel capital ratios for our local banks remain comfortably above the 12 per cent requirement, which in turn is significantly above the 8 per cent Basel requirement.”

Sheikh Ahmed said the government would therefore not intervene more extensively in the banking sector in 2009. “The central bank will limit itself to providing liquidity to local banks through its swap operations,” he said. “This does not mean that the government will not step in to provide support where it is needed.”