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Tue 24 May 2011 05:29 PM

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Middle East needs ‘mega bank’ to rival west

Region needs large-scale lender to mobilise funds, rival foreign banks says StanChart

Middle East needs ‘mega bank’ to rival west

The Middle East must put its financial muscle behind creating
a super bank if it is to compete with the world’s global powers, the CEO of
Standard Chartered in the region said Monday.

A large-scale, globally reputed bank is essential to mobilise
funds and help the region manage its huge wealth reserves and trade flows, said
V. Shankar, CEO of the firm in
Europe, the Middle East, Africa and Americas.

“Although the
Middle East is a region with huge reserves most of this is recycled to western
financial institutions,“ he said at the 4th Arabian Business Forum. “Very few,
if any of the top 50 banks around the world are from emerging markets.

“Is the time
right for the Middle East to fill this void and build its own financial
champion? A serious, global Middle East bank would help the region manage and
control its wealth reserves.”

Banks and
investment houses mushroomed to tap into the oil wealth accumulated in the
Middle East, but local lenders remain small compared to their western rivals.

This reduces
their ability to compete with the wholesale banking offered by major lenders,
and has sparked calls for consolidation.

Shankar also said
the Middle East could benefit from a regional development bank in the style of
those in Asia and Europe. The institute could help raise capital for projects
such as the $1.5 trillion-worth of infrastructure deals planned in the Gulf
over the next decade, he said.

“Asia has its
South Asian Development Bank, Europe has its European Development Bank but we
don't have one for MENA. Why shouldn't we have one? Surely such an institution
would help trade flows and help keep an equal distribution of wealth across the
region,“ he said.

“Such a bank
would be a clear signal to the rest of the world that we are taking development
seriously.”

The region
already plays host to the Islamic Development Bank in Saudi Arabia, which
provides finance across the Islamic world rather than just within the Middle
East.

Chief economist
at Banque Saudi Fransi John Sfakianakis said such an bank could
be valuable in providing loans to developing businesses that would otherwise
struggle to obtain finance.

“The development
banks are more attuned to regional and local projects, they are less
commercially attuned than the large banks that exist,“ he said.

British lender Standard Chartered reported its successive year of record profit in March, after cutting jobs in the first quarter to safeguard profitability. The bank makes three-quarters of its profit in Asia.

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