Arab banks urged to brace for new world financial order Arab banks should take urgent measures to ensure stronger co-ordination so they can play an active role in the development of a new world economic order spawned by the current financial crisis,
the top Arab banker has said.
Adnan Ahmed Yousuf, Chairman of the Union of the Arab Banks (UAB) said all countries are expected to contribute to the evolution of the new global system, adding the recent trips by British Prime Minister Gordon Brown and other officials to the Gulf illustrated the important part it can play in this field."All countries are expected to participate in the new world financial order, including the Arab states.
The trips to the Gulf by Gordon Brown and other officials represent a clear recognition of the role of regional states in tackling the current crisis. In recognition of such a role, they should be involved in forging the new global economic order on par with other nations,"
Yousuf wrote in the Arabic magazine of the Beirut-based UAB."In this field, Arab banks can play an effective role that will complement the role of their governments. Arab banks can offer a lot in this field but they need to take quick measures to expand co-ordination among them and act as a single Arab banking bloc. Arab banks are also urged to learn lessons from the current crisis by utilising it in developing their financial, technical and human resources,"
Yousuf, whose group comprises most of the Arab world's 470 banks, said acting as a single bloc
would largely strengthen Arab banks and allow them to face the current crisis given their massive resources of nearly $1.7 trillion (Dh6.2trn). But he also stressed the banks must get closer to their respective central banks."Acting as a single bloc
has become imperative in the present conditions, while the banks should also strengthen co-ordination with their respective central banks after the crisis showed that most banks could face serious problems and challenges in managing short term liquidity," he said.
"Like those economies which have been jolted by the crisis, Arab economies have certain flaws but are not exposed to such sort of crises because of the differences financial practices between the region and global economies."
Yousuf said Arab banks, some of which have reported losses from the global crisis, should turn to the local market to avert the complexities of the foreign markets, adding that the region has sufficient investment scopes.
"The Arab countries have vast investment capabilities but regional banks need to exploit these capabilities in order to finance domestic development and at the same time channel their funds into profitable and safe sectors," he said."Arab banks are today called upon to enter the local markets with full force, whether through direct investment, offering credits or entering as partners. If they want to play an active role in setting up the new global order,
Arab banks in co-ordination with their central banks should act quickly to restore the confidence of all parties with which they deal whether they are shareholders, investors, creditors or other customers."
He said this can be done through chalking out definite plans to rebuild their financial adequacy, strengthen customers' confidence, and upgrade transparency and disclosure practices to protect all parties in the market.
"It is true that all Arab governments have taken measures to face the crisis by providing liquidity, guaranteeing deposits and reassuring investors but all of them need to work for expanding co-operation and co-ordination among regional banks and relevant institutions," he said.
"They should now devise more ambitious programmes and take serious measures to implement them especially in achieving integration among Arab markets, liberalizing inter-Arab investment, supporting all private sector establishments and their initiatives, and allowing it to play a leading role in the integration process. I am sure this will give a strong push to measures to diversify regional economies, stimulate growth and attract more banking investment away from the volatility and crises in global markets."
Another key Arab banker said the impact of the global crisis on Arab banks has so far remained limited because of what he described as the big disparity in the financial and economic practices in the region and the US.
The gap exists mainly in the real estate financing activities whether by conventional or Islamic banks, said Fouad Shaker, UAB Secretary General.
"Another reason for this limited effect is the early realisation by the Central banks and market regulators in the Arab World of the need to impose controls to prevent the spread of the crisis to our establishments," he said. "But although it is still far from the crisis, our Arab region remains vulnerable to the indirect effects of the crisis. In this respect, there are negative and positive effects, including the decline in the oil prices and the downward pressure on the economies and budgets of Arab oil producers. The positive effects include the drop in global commodity prices, which represent a chance for our countries to increase domestic investment and support the local infrastructure."
UAB figures showed Arab banks recorded strong performance in 2007, with their combined assets surging from $1,268bn at the end of 2006 to their highest level of nearly $1,691bn, an increase of around $422bn or 33.2 per cent.
According to national data, the UAE controlled the largest assets in the region at the end of 2007, standing at around $335bn, nearly 20 per cent of the total Arab assets.http://www.business24-7.ae/articles/2008/12/pages/12182008_5328919801ae4c68a9da31025652ac58.aspx