Arab banks can play vital role in recovery

Arab banks should play a bigger role in domestic development to accelerate the recovery of regional economies from the repercussions of the global financial turbulence, said the Arab World's top banker yesterday.

Regional banks have the capability to play that part given their massive financial resources of nearly $2.2 trillion (Dh8trn) and their expanding role in world markets, said Adnan Ahmed Yusuf, Chairman of the Beirut-based Union of Arab Banks (UAB).

Writing in the latest issue of UAB's Arabic-language bulletin, Yusuf said the economies of Arab nations, mainly those of Gulf oil producers, are heading for a quick recovery but stressed regional banks should play their part in this regard.

"It has become clearer than ever that Arab banks can play an active and pioneering role in stimulating regional economies. The banks should embark on that role, prompted by the fact that Arab economies are heading quickly for a recovery from the global crisis and the fact that they have been only slightly affected by the crisis," said Yusuf. UAB includes nearly 470 banks.

"Besides, Arab banks possess massive financial and human resources to play that role. This capability has been demonstrated at our recent banking conference held in London in the presence of British officials."

Citing estimates by the International Monetary Fund, Yusuf said the combined economy of the six-nation Gulf Cooperation Council (GCC) alone is projected to become the fifth largest in the world by 2013.

"We have made clear at the conference in London that the GCC region will be able to recover from the global crisis by 2010 and such a view has been supported by many experts and observers, including British officials," he said.

"This means the GCC countries will be among the first nations to rebound from the crisis. This should encourage Arab banks to use their resources in that direction, considering the fact that their losses from the global crisis did not exceed only one per cent of the total losses of the world's banking sector."

Yusuf noted that several Arab banks are included in the world's top 1,000 banks announced recently by Arab Banker magazine. The list included 17 UAE banks, 11 from Saudi Arabia, 10 from Bahrain, eight each from Kuwait and Lebanon, six from Qatar, five from Jordan, four from Egypt, three each from Oman, Morocco and Tunisia and one each from Syria and Algeria.

At the end of 2008, the combined assets of the Arab banks surged by about 15 per cent to nearly $2.2trn, including around $1.2trn in the GCC. Yusuf gave no breakdown but official figures showed the UAE controlled the largest assets in the Arab banking sector, with about $400 billion, more than 18 per cent of the total Arab banking assets. Saudi Arabia had the second largest assets of about $351bn, followed by Egypt.

"These figures illustrate the growing size of the Arab banks and the role they can play in domestic development," said Yusuf. "This should encourage them to expand their financing and investment operations in the region to support economic growth and pull member states out of the crisis."

Yusuf renewed his calls on Arab banks to strengthen coordination to serve local economies and play a bigger role in the post-crisis global financial order.

"Acting as a single bloc has become imperative in the present conditions while the banks should also strengthen coordination 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 in financial practices between the region and global economies. Increasing cooperation will allow Arab banks to undertake a more effective role that will complement anti-crisis government measures in the region."

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