Business | Banking
13 UAE banks exposed to troubled Saudi groups
Central Bank will ask each lender to make provisions for losses.
- By Ahmed A. Namatalla, Staff Reporter
- Published: 23:02 September 28, 2009
Abu Dhabi: UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi confirmed yesterday that 13 local banks are exposed to the Saad and Algosaibi groups, but declined to specify the total amount owed by the Saudi family businesses.
Speaking on the sidelines of the annual meeting of Arab central bankers, Al Suwaidi said the Central Bank will soon set the minimum amount to be set aside by each bank to cover the potential losses.
"We have four categories of exposure and will announce the degree of provisions the banks must take for each one," the governor told reporters, adding he expected banks to report lower earnings for the rest of the year as a result of their exposure to the groups.
So far, only Abu Dhabi Commercial Bank (ADCB), mashreq and National Bank of Abu Dhabi (NBAD) have disclosed their exposure to Saad and Algosaibi. ADCB and mashreq said they are owed $609 million (Dh2.2 billion) and $400 million respectively, while NBAD has reported an almost negligible $11 million. "It has been clear for some time that banks in the UAE and elsewhere have been hit fairly hard by Saad and Algosaibi," said David Butter, Economist Intelligence Unit chief economist. "But it will be difficult for central bankers to take any decisive measures on this affair because it is still subject to some fairly large lawsuits in New York."
Mashreq and Algosaibi have pending claims and counterclaims against each other in New York. Other Gulf banks owed money by the groups, such as Kuwait's Al Ahli Bank, are reportedly preparing to file lawsuits there.
The groups are estimated to have borrowed at least $15 billion according to bankers' estimates, and as much as $30 billion, according to a recent Standard and Poor's survey, from more than 80 banks globally.
"We think the disclosure of the UAE banks' exposure to the Saad and Algosaibi groups will help improve transparency on the market and help dissipate some market concerns," said Delphine Arrighi, Middle East and Africa senior rates strategist at Standard Chartered Bank. "Such an exposure was already largely discounted, but uncertainties regarding the amount had weighed on UAE banks papers. The figures announced are actually smaller than what the market had previously discounted."
Al Suwaidi is due to participate in today's meeting of Gulf Cooperation Council (GCC) central bankers. Yesterday, he reasserted the UAE is still not considering rejoining the proposed GCC monetary union. "The subject is not currently under discussion," he said.
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