GCC bank­ing sys­tems well-po­si­tioned

Pakistan Observer - - ISLAMIC BANKING & FINANCE -

DUBAI—The bank­ing sys­tems of the GCC coun­tries are well po­si­tioned to cope with gov­ern­ment rev­enue short falls aris­ing from low oil prices and de­cline in eco­nomic growth, ac­cord­ing to In­sti­tute of In­ter­na­tional Fi­nance (IIF), a global as­so­ci­a­tion of more than 500 lead­ing fi­nan­cial in­sti­tu­tions. De­spite the un­der­ly­ing strength of bank bal­ance sheets in the re­gion, the IIF ex­pects pro­longed low oil prices to weaken as­set qual­ity and prof­itabil­ity. Fi­nanc­ing costs are ex­pected to rise with shrink­ing liq­uid­ity and fur­ther hikes in the US in­ter­est rates in the sec­ond half of this year.

Eco­nomic ac­tiv­ity and fi­nan­cial de­vel­op­ments in the Gulf oil ex­porters are in­ter­linked with oil price de­vel­op­ments. Given this link­age, low oil prices are likely to re­sult in de­te­ri­o­ra­tion in the as­set qual­ity and liq­uid­ity of banks, and fi­nan­cial sec­tor stress is­sues may emerge. How­ever these are un­likely to cause any sys­temic risks to bank­ing sec­tors in the GCC.—Agen­cies

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