Gulf banks need more provisioning: AMF

Some Gulf banks need more provisions to scrub themselves clean from problems of the credit crisis, and their lending must become more prudent to avoid future bubbles, the head of the Arab Monetary Fund (AMF) said.

Jassim Al Mannai, Director-General of the Abu Dhabi-based AMF, said in an interview the Arab economies will grow around four per cent this year but that he saw no threat from inflation.

Lending growth in the Gulf economies remains sluggish as the region's banks suffer from shrinking margins and bad loans resulting from the crisis.

"I would not say everything has been addressed, no problems at all," Mannai said on the sidelines of the annual meeting of the Bank for International Settlements. "I have to be realistic. Some of the banks need to take more provisions. They have to be careful not to repeat the same practices before."

He said: "They have to address some problems inherited from the crisis through more provisioning, through prudent lending policies. I don't think banks will be able to provide the same amount of credit as they used to before. They have to be more selective." Mannai said: "In the future, they will have clean balance sheets and they can start fresh lending without any handicaps."

"We have to think seriously about the lessens of the crisis. We have to avoid... bubbles," he said.

Mannai was optimistic that the Arab economies would see positive growth this year without threatening the price rises they saw during the pre-crisis boom period. "This year the situation for the Arab world will further improve. We're talking about four per cent or more than that for the Arab economies," he said.

"We have a very low inflation rate. For the time being it's not a threat. In the GCC, we're talking about two or two something per cent."

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