BIS Review 163/2008  1  At the Central Bank of Bahrain we have been monitoring domestic and international developments very closely. However, our domestic financial markets have continued to function normally despite the enormous stresses of recent months resulting from international events.
It is true that domestic liquidity conditions have become tighter, but this has been mainly due to outflows of capital linked to earlier speculation on the revaluation of GCC currencies. Our financial system has shown its resilience by absorbing both large capital inflows and outflows over the past year.