Bahrain’s financial institutions are being monitored as they impose precautionary restrictions on the staff of Gulf Air  and Bahrain Air, said the kingdom’s banking watchdog. The Central Bank of Bahrain  (CBB) pledged it would take action if appropriate, after Bahrain Air announced it was going into voluntary liquidation last month and Gulf Air commenced a major downsizing that involves redundancies, said a report in our sister publication, the Gulf Daily News (GDN).The GDN reported last week that banks had frozen the personal accounts of Bahrain Air  staff.This followed news that Credimax had suspended accounts of all Bahrain Air employees, as well as expat staff at Gulf Air , until they could prove they were employed.It has now emerged that at least one bank, Standard Chartered Bank, is no longer immediately accepting cheques written by Gulf Air if the beneficiary has outstanding loans or credit card debt.The measures have been introduced amid fears that staff laid off by the airlines, particularly foreigners, could leave the country after getting their severance packages without paying off their loans.A senior banker told the GDN last week that customers should be given 15 days' notice of their credit cards being frozen, while lawyer, former MP and member of the National Institution for Human Rights Fareed Ghazi said banks must obtain a court order before a personal account could be frozen.However, the CBB said the rules were defined by individual contracts between banks and their customers - unless they violated a specific regulation."The precise rights and obligations that exist between a bank or credit card issuer and its customers are primarily determined by the terms and conditions governing that relationship, save to the extent that these are contrary to a specific rule of law or regulation," said the CBB in a statement to the GDN ."Without a thorough investigation into each and every relationship, it would be impossible for the Central Bank or anyone to say with any certainty whether rights or obligations have been violated."The Central Bank is however aware of the general nature of these developments and we continue to monitor the situation closely and will take action where we consider appropriate."The GDN saw an internal memo to staff at a branch of Standard Chartered  yesterday informing them not to immediately accept cheques written by Gulf Air and two other companies.An official at the bank said this was an instruction from management, but did not mean that the cheques would be refused."It doesn't mean that the cheque has been refused, but that we want to check if that person (the beneficiary) is still working at the company," said the source."The (Gulf Air) redundancy packages are being given as cheques and if we just cash them, it can leave the bank with all the debt (from outstanding loans and credit cards)."This is especially for foreigners, as they can take their money and leave the country with a lot of debt."But if a person comes in with no debt or credit card, the cheque will be approved immediately. If not, the person will have to settle loans and cancel their credit card service if they have one. An alternative is to prove employment elsewhere."The source explained that those unable to pay off their debts might have their assets held, but claimed this was within the rights of the bank."When anyone takes a loan they have to supply a transfer salary form signed by their employer," the source said. "That form states that the employer will transfer the severance package to the bank. That is why we are able to hold those cheques until the debts have been settled."The Bahrain Association of Banks could not be reached for comment yesterday, while Standard Chartered Bank did not officially comment.