Gulf banks could lose ac­cess to dol­lar clear­ing: UAE CB chief

Kuwait Times - - BUSINESS -

ABU DHABI:

Com­mer­cial banks in the Gulf could lose their abil­ity to have dol­lar trades cleared through the US bank­ing sys­tem, in­creas­ing risks for them, the United Arab Emi­rates’ cen­tral bank gover­nor warned yes­ter­day. Mubarak Rashid Al-Man­souri told a fi­nan­cial con­fer­ence that US and Euro­pean banks were con­tin­u­ing to scale back their re­la­tion­ships with Gulf banks be­cause for­eign reg­u­la­tors were re­quir­ing them to do more due dili­gence on cus­tomers, rais­ing costs for the for­eign in­sti­tu­tions.

“One large US bank had de­risk­ing is­sues in the re­gion in or­der to com­ply with tighter risk con­trols. As the US dol­lar re­mains the dom­i­nant in­ter­na­tional cur­rency, other US banks are fol­low­ing suit,” Man­souri said. “This could leave banks in the re­gion with­out any US cor­re­spon­dent bank­ing re­la­tion­ships, forc­ing them to clear their US dol­lar trade through cen­tral banks.”

Such an ar­range­ment would in­crease risks be­cause it would add one more party to the pay­ment process, and it would put an “un­rea­son­able bur­den” on the Gulf’s cen­tral banks, Man­souri said.

Se­nior mon­e­tary of­fi­cials in the Gulf have been pub­licly com­plain­ing for a year about the re­luc­tance of in­ter­na­tional, par­tic­u­larly US, banks to deal with some of their Arab coun­ter­parts, and Man­souri’s re­marks sug­gested the sit­u­a­tion re­mained se­ri­ous.

A study by the Arab Mon­e­tary Fund, pub­lished in Septem­ber, found for­eign banks were shy­ing away for var­i­ous rea­sons in­clud­ing con­cern about violating eco­nomic sanc­tions, the risk of un­wit­tingly be­ing im­pli­cated in money laun­der­ing and fi­nanc­ing of ter­ror­ism, and a broadly shrink­ing ap­petite for risk. Man­souri said the Gulf was al­ready com­ply­ing well with rules against money laun­der­ing and ter­ror­ist fi­nanc­ing, and that UAE author­i­ties were in touch with US author­i­ties and banks to con­vince them of this. He said the cen­tral bank was also work­ing with the UAE as­so­ci­a­tion of banks to as­sess the level of com­pli­ance fur­ther, par­tic­u­larly for smaller banks. Mean­while, the cen­tral bank is scru­ti­niz­ing money ex­change houses and may take some houses’ li­censes away if they don’t com­ply with rules, Man­souri added. The UAE cen­tral bank re­voked the li­censes of two money ex­change com­pa­nies in 2013 and an­other one this year. —Reuters

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