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French Version

Cautious approach spared Arab banks direct effects of subprime fallout

But Leading bankers in region say they must remain alert

The prudent policies of Arab banks and financial institutions have allowed these entities to avoid the negative effects of the acute crisis that hit the stock markets in the United States and part of Europe, a leading Arab banker says.

Addressing a large group of bankers that gathered at the Phoenicia InterContinetnal Hotel in Beirut on Friday evebing, Union of Arab Banks chief Adnan Youssif nevertheless cautioned bankers in the Middle East not to take the crisis in the West too lightly.

"It is true that Arab banks managed to escape the ramifications of the financial crisis in the US. But this does not mean that we should remain idle and pretend nothing is happening around us," Youssif said.

He added that Islamic financial institutions, banks and insurance firms in the region must always be alert and update laws and regulations that protect these firms from any unforeseen danger in the future.

Youssif's statement was in line with other comments by Arab bankers who met in Jeddah last week to discuss the monetary situation in the Gulf Cooperation Council countries.

Youssif said Arab central banks in general pursued a cautious policy in recent years and this has spared them from any negative effects of a crisis.

He added that investments represent a strong component of inter-Arab relations, as well as in for ties between the Arab world and other regions.

Youssif noted that Arab stock markets, especially in the Gulf, saw share prices fall to alarming levels last Monday before recuperating in the following days.

The Gulf Arab region, flush with liquidity from more than five years of soaring oil prices, has been relatively sheltered from the crisis that has hit the United States and Europe.

Qatar's central bank chief, Sheikh Abdullah bin Saud al-Thani, told Reuters Qatari banks had "no exposure at all" to Merill Lynch or Lehman Brothers.

UAE Central Bank Governor Sultan Nasser al-Suweidi and his Omani counterpart, Hamud bin Sangur al-Zadjali, echoed those sentiments when asked if there was systemic risk.

The region's largest bank by assets, Emirates NBD, said its exposure was negligible.

"It's nothing that would cause us to lose any sleep," said chief financial officer Sanjay Uppal.

One banker told The Daily Star that Lebanese banks have been warned by the central bank against risky investments in stocks and subprime paper in the US.

"This warning paid off. Look at what happened to the US market. We can't take any chances with the money of our clients," the banker said.

Youssif also said Arab banks and financial institutions may be keen to buy Lebanese Treasury bills and Eurobonds in the future. "These instruments are issued by the government to meet certain needs of the country and I don't think that Arab banks will shun these bonds," Youssif said.

Beirut 22-09-2008
The Daily Star

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