Banks must curb exposure to risk

The Central Bank has said that UAE banks have a combined exposure of $2.9 billion (Dh10.7 billion) to Saudi Arabia's troubled business groups — Saad and Algosaibi — and ordered them to make specific provisions for these loans.

Twenty banks — 13 national and seven foreign with branches in the UAE, are affected.

The Central Bank intervention will strengthen investor and consumer confidence in the banks whose exposure to the Saudi groups has weighed heavily on the financial services industry across the Gulf.

Investors do not like uncertainty and avoid companies and institutions that they believe are exposed to risk.

By publicly quantifying the exposure and detailing the steps taken to mitigate the risk, the Central Bank has strengthened the UAE financial services system.

As the world has found out, without an efficiently functioning financial system the global economy slows down dramatically.

In these troubled times it is best that all banks be conservative in their practices.