By Amy Glass
Ratings agency Standard and Poor's warns lenders may be hiding shortfalls related to mortgage crisis.
Gulf banks may be concealing losses suffered as a result of the US subprime mortgage crisis, ratings agency Standard and Poor’s (S&P) warned on Monday.
Emmanuel Volland, director of financial services at S&P, said while the exposure of Gulf banks to the subprime crisis was limited, it appeared that some banks were hiding their shortfalls, UAE daily Gulf News reported on Tuesday.
Transparency and quality of disclosures are a problem with some GCC banks, and information on the nature of their exposure is limited, he said.
“A few banks have recently acknowledged subprime related losses and there could be a few still hiding their exposure,” Volland told the newspaper.
In August, S&P surveyed the 20 regional banks it rates in the Gulf and concluded that subprime losses could be less than 1% of the banks’ total assets.
At the time S&P said the survey's main finding was that the vast majority of Gulf banks have no or insignificant exposure to subprime instruments, and although a few banks reported some exposure, any risk would be manageable.
However, Volland said a further deterioration in the values of subprime assets in the fourth quarter of 2007 had resulted in the valuations of investment portfolios of some of these banks dipping further.
Arab Banking Corporation and Abu Dhabi Commercial Bank (ADCB) reported declines in profits due to portfolio declines linked to US and western markets this month, while international rating agency Moody's warned in December of Gulf banks being affected by subprime related losses.
Global banks including Citigroup and Merrill Lynch & Company have written down at least $75 billion in credit market losses as a result of the US subprime mortgage crisis, which has plunged the economic superpower into financial turmoil.