The Central Bank of the United Arab Emirates (CBUAE) and the Central Bank of Bahrain (CBB) have entered into a currency swap agreement involving the Bahraini Dinar and the UAE Dirham, formalised during a virtual signing ceremony on Wednesday.
Valued at 2B Bahraini dinars, equivalent to 20B UAE dirham, the agreement is set for five years. The signing was conducted by the Governors of both central banks, intended to bolster financial cooperation between the two nations.
The agreement is expected to enhance the use of local currencies, paving the way to increase the uptake of GCC local currencies by trading institutions in either country.
Analysts note that the agreement supports liquidity for Emirati and Bahraini banks in the event of liquidity pressures whilst reducing the reliance on the U.S. dollar.
It is also seen as a step towards supporting regional financial integration in the GCC, a long term goal of the six GCC economies.
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