Interpreting Middle East Economic News and Analyzing Market Trends

Category: Banks

The UAE’s consumer debt on the rise, fueling spending across the country

 

For years now UAE banks have struggled to kick-start consumer loan growth as the corporate side was taking too long to recover from the financial crisis.  We reported last March that UAE banks were becoming more aggressive towards consumer lending and were back to pre-crisis sales tactics in order to growth their loan portfolios.  Now it seems that they got what they wanted only to set off alarm bells as some fear this growth has come too soon and is growing too fast.

 

 

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The next financial crisis will wipe out the lagest financial institutions. How will Islamic financial institutions fare?

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The headline in Forbes from this past March reads “Risk is Back.”  Financial institutions today are riskier and have more derivative exposure than they had prior to the Lehman failure in 2008.  More specifically, a handful of banks carry over 95% of the estimated $250 trillion global derivative exposure.  This is trillion with a ‘T’ and not billion with a ‘B’.  To put this in perspective, the total US GDP in 2012 was about $16 trillion.  It’s already a foregone conclusion that the next financial crisis will wipe out these mega-institutions as they will be too-big-to-save.  What will happen to Islamic banks and financial institutions as the dominoes begin to fall?

 

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The world’s local bank can’t seem to stop breaking the law

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HSBC Bank, formerly known as The World’s Local Bank, can’t seem to catch a break lately.  Barely six months since the bank was ordered to pay $1.9 billion to settle charges of money laundering, the bank is being sued again.  This time, the law suit is coming from New York State.  Here’s the story from BBC News:

 

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Basel III: How The Bank For International Settlements Is Going To Help Bring Down The Global Economy

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We are re-posting this article on the Bank of International Settlements and Basel III because of its global importance.  Implementation of Basel III, which banks will start phasing in this year will have great implications on the entire financial system.  The concept and theory behind Basel III are prudent and well-intended.  However, it’s a bit too late to put these in place as they will ripple through the financial system causing serious damage to an already fragile system.

  

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Islamic Banking in Libya: putting the cart before the horse

Even before the fall of Gadhafi, Libyan rebels were busy launching a central bank.  Never before in the history of revolutions have rebels setup a central bank before gaining control of the government.  This is strange enough in its own right and brings up many questions, but that’s another story.

 

One of the first items on the agenda for Libya’s new government was to convert all banks in the country into Islamic banks.  The main problem with this decision is that the government failed to come up with Islamic bankinh regulations before putting this law forward.  Now banks are stuck in limbo trying to figure out their way through this.

 

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