Experts: Arab Banks Successfully Face Economic Crises

Arab Banking Conference 2012, held on 11th and 12th of April in Abu Dhabi, discussing ways of implementing Arab economic safety, improving Arab-Arab relations and tackling the challenges and prospects of Arab-Arab investment and financial relations.

The conference is held while Arab economies suffer instability after Arab uprisings. Officials at the Union of Arab Banks estimated the losses incurred by Arab spring countries with US$ 55 million because of the political and security turmoil they witnessed in 2011. The growth rates in Arab countries in general retreated as a result of the instability in the region.

The conference is organized by Union of Arab Banks (UAB) in collaboration with Central Bank of the United Arab Emirates, Emirates Banks Association, World Union Of Arab Bankers and regional and international organizations, ministers of finance and economy, governors of Arab central banks and Arab and international financial and banking leaders.

The Conference is part of UAB’s efforts in setting strategies for the recovery of Arab economies, boosting Arab economic solidarity and bolstering Arab-Arab relations in a way to keep economic safety.

The Conference came after a year of economic instability that hit Arab spring countries hindering them from meeting their liabilities and improving economies.

Economic experts stressed on the necessity of establishing an Arab Fund to be backed by wealthy Arab countries such as Marshall Fund U.S. established to reconstruct Europe after World War II. The suggested Arab Fund will reconstruct Arab spring countries so as to foster political stability.

Analysts said that economic unity among Arab countries necessitates removing obstacles hindering flow of cash and goods among countries. There are 480 banking institutions in Arab countries managing assets of more than US$ 780 billion and having deposits exceeding US$ 478 billion, equities of more than US$ 71 billion and foreign assets of US$ 185 billion. In addition, Arab banks lend about US$ 365 billion as loans to deposits ratio reached 77% and loans to assets ratio reached 47%.

In this regard, economic experts at regional and international financial institutions expected that the money Arab countries need to develop infrastructure ranges from US$ 50 billion to US$ 80 billion annually till 2020. After the destruction resulted from Arab spring events, the required money increased from US$ 450 billion to US$ 700 billion.

As traditional banks have an increase in liquidity, they post pressure on their profit centers. However, they were not able to invest the surplus because of the short maturity dates. Investments are known that they require medium and long maturity dates, but there are many banks in Arab countries that succeeded in gaining profit from short-term loans.

Analysts said that there is an urge to relaunch Arab solidarity project on more solid bases and with a partnership between private sector and Arab governments.

Wissam Fattouh, Secretary General of the Union of Arab Banks (UAB), stressed that UAB shall increase its efforts to face the negative repercussions on economy that Arab countries has been witnessing through organizing conferences and interviews to increase openness among Arab countries and develop Arab financial ideologies and Arab banking industry on sustained and sound bases.

Analysts called on Arab banking systems to be ready to deal seriously with developments and challenges facing banking development and liberalization as well as electronic trade. This will be through boosting the role of monetary authorities, developing banking and financial legislations, and adopting successful experiences of other countries.

The number of Arab banks exceed the volume of economies; therefore, analysts called on Arab authorities to enact laws so as to encourage banks to expand locally and merge and acquire in other countries as well as build strategic relations, in a move to improve organic growth of Arab banks.

Bolstering solidarity among Arab spring countries after political stability will be easier implemented as it will meet the needs of the people not the governments. Therefore, the philosophy and plans of economic solidarity shall be reconsidered.

Despite the challenges facing Arab banks, they are enjoying competitive human and financial capabilities which enable Arab banks to play a key role in making world monetary and financial decisions. Besides, Arab countries enjoy strategic geographical positions on the world’s financial map and also acquire half of oil, gas and water reserves.

Joseph Tarabay, the Chairman of the World Union of Arab Bankers, said that Arab banks have proved their ability to face crises in the last world financial and banking crisis.  Tarabay added that Arab banks helped some western banks whose assets became not exchangeable in world markets.

As Arab banking systems have witnessed a unification process in the last decade, political and economic changes extend across the region.

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