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Thu 16 Jul 2009 11:08 AM

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UAE central bank calls bank meeting on Saudi exposure

Meeting to assess potential problems due to lending to troubled Saud conglomerates.

The central bank for the United Arab Emirates was meeting commercial banks on Thursday to assess potential problems due to lending to two troubled Saudi family conglomerates, bankers said.

"The meeting is on the invitation of the central bank, mainly to review exposure of UAE banks to the Saad/Algosaibi groups," an Abu Dhabi-based banker, who is attending the meeting, told Reuters.

Emirates Business (www.business24-7.ae ) reported on Thursday the central bank aimed to devise an action plan for the banks, about 25 of whom face potential losses from lending to Saudi family firms Ahmad Hamad Algosaibi and Bros Group (AHAB) and Saad Group.

The paper cited one banking source.

The central bank held a meeting with banks on the topic last month, the banker told Reuters.

"It is going to be an action-taking meeting," another banker said.

Regulators and bankers alike are grappling with the fall-out from debt restructuring at Saad Group and Algosaibi, seen as the biggest blow to hit the Gulf region since the start of the financial crisis.

Numerous Gulf Arab banks have said they face potential writedowns on loans made to the groups, and HSBC has estimated the lending exposure of Saudi banks alone at $4-$7bn.

In the UAE, at least five banks, including Mashreqbank, National Bank of Abu Dhabi and Abu Dhabi Commercial Bank, have exposure to the Saudi firms, according to banking sources or the banks themselves. (Reuters)

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Ivo Cerckel 11 years ago

The solution for the huge bad debt problem at the Saudi business groups Saad and Algosaibi is to depeg the Saudi Riyal from the US of A dollar. Secretary of the US of A treasury, Timothy F. Geithner said therefore on Tuesday at the Jeddah Chamber of Commerce that he thinks the world has yet to fully appreciate the scale of ambition [...] we are seeing in the Kingdom [of Saudi Arabia] and the Gulf region to lay the foundation for future growth. It would appear that by saying that, Geithner was actually praising the ambition of the Kingdom of Saudi Arabia to break free from the dollar peg in order to solve the huge bad debt problem at the Saudi business groups Saad and Algosaibi. But on Wednesday UAE Central Bank Governor, Sultan Al-Suwaidi, said that the UAE dirham, which will not participate in Gulf Monetary Union, will remain pegged to the US of A dollar, Of course, the UAE Central Bank now has a big problem.

mart 11 years ago

pegging to $ allows makes the country (SA kingdom, UAE) follow the USA economic decisions. until theses countries prepare themselves to be economically and politically separate from the USA, the peg will continue. recently Kuwait broke the peg, so it can be done. it needs decent, well minded people at the top