MANAMA, Feb 23 (Reuters) - Bahraini authorities will discuss with the U.S. Treasury the problem of international banks becoming reluctant to deal with banks in Bahrain and the Gulf because of tight U.S. regulation, Bahrain’s central bank governor said on Tuesday.
“Many international banks have curtailed their correspondent services with regional and local banks. Some of the banks have refrained from dealing with exchange houses,” Rasheed Mohammed al-Maraj told a business conference.
“This has affected a wide sector of the population, especially the expatriates.”
Maraj said officials in Bahrain, one of the Gulf’s financial centres, had met U.S. Treasury officials last November and planned another meeting on the issue in April.
U.S. regulations, part of a tougher regime introduced since the financial crisis, include scrutiny of potential tax avoidance and anti-money laundering rules.
These have imposed extra costs on U.S. banks, prompting many to reduce the number of foreign institutions with which they do business, and making international banks operating in the United States more wary of ties with the Gulf.
Some banks in the Gulf have been under particularly close scrutiny by U.S. authorities because of a drive to curb financing of Islamist militancy and flows of money to Iran.
United Arab Emirates central bank governor Mubarak Rashid al-Mansouri complained of the problem in December, saying it had become harder for UAE banks to obtain dollar clearance services - the processing of transactions in the U.S. currency.
Maraj said Bahrain was engaging with U.S. authorities including the Federal Reserve and the Office of the Comptroller of the Currency, as well as with international banks, to convince them that the compliance standards of Bahraini and Gulf banks were in line with global practices.
“We are hoping they will give us some flexibility ...” he said. “This is a serious issue for us.” (Reporting by Hadeel Al Sayegh; Writing by Andrew Torchia; Editing by Alison Williams)