Arab Today, arab today gulf banks under pressure from low oil prices
Last Updated : GMT 21:46:51
Arab Today, arab today
Arab Today, arab today

Gulf banks under pressure from low oil prices

Arab Today, arab today

Arab Today, arab today Gulf banks under pressure from low oil prices

The financial district in Dubai in GCC member country the United Arab Emirates
Dubai - AFP

Banks in the six-nation Gulf Cooperation Council (GCC) are being increasingly challenged by a liquidity squeeze resulting from low oil prices, Moody's Investor Services said on Monday.

A sustained loss in oil revenue is likely to reduce government and government-related deposits in banks and could eventually reduce state support for the banking system, the ratings agency said.

Government willingness and capacity to support GCC banks has played a key role in sustaining their credit growth, asset quality and loss-absorbing buffers, it said.

"The widening gap between low oil prices and high government spending policies could have increasingly negative credit implications for the banks," Moody's said.

The national budgets of GCC states in 2016 indicate a slowdown in economic growth accompanied by large fiscal deficits, it said.

World oil prices have dropped by more than 70 percent since June 2014. Oil income normally contributed 80 to 90 percent to GCC public revenues.

"We anticipate banks will be pressured by a further softening of their operating environment and the potential for reduced willingness or capacity of governments to provide support," Moody's said.

In the past few decades, GCC governments have shown a consistent record of intervention to avoid losses to creditors and depositors through direct capital injections and official guarantees, it said.

"Lower government financial reserves, however, could lead to a shift in policy towards more selective support," the agency said.

So far, the most visible impact of lower oil prices on GCC banks has been a tightening in liquidity due to significantly reduced deposit inflows from government and government-related entities.

The squeeze in liquidity is already pushing banks to compete more aggressively for deposits and tap public markets, thereby increasing funding costs and impacting profitability.

A sharp slowdown in public spending will also negatively impact loan growth and corporate earnings, Moody's said.

GCC states -- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates -- are estimated to have lost $300 billion in revenues last year due to low oil price.

Last week, the London-based Capital Economics said the slump in oil revenue was unlikely to cause any major problem for Gulf banks which are well-placed to deal with a rise in bad debts.

It said deposits withdrawn by governments from banks to plug budget deficits were being used in domestic spending with part of it going back to the banking system through the private sector.

 

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today gulf banks under pressure from low oil prices Arab Today, arab today gulf banks under pressure from low oil prices

 



Arab Today, arab today

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today gulf banks under pressure from low oil prices Arab Today, arab today gulf banks under pressure from low oil prices

 



Arab Today, arab today France defies terrorism through tourism

GMT 15:18 2017 Saturday ,20 May

France defies terrorism through tourism
Arab Today, arab today Zainab Fadel Oglu designs “Shakerin” mosque

GMT 12:13 2017 Thursday ,11 May

Zainab Fadel Oglu designs “Shakerin” mosque
Arab Today, arab today Seeks to move past rift with Israel

GMT 08:00 2017 Monday ,08 May

Seeks to move past rift with Israel
View News in Arabic - Business: نفط وبتروكيماويات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Mozambique's gas boom dream under threat

GMT 16:29 2017 Monday ,08 May

Mozambique's gas boom dream under threat
Arab Today, arab today Prepares to give stargazers an eyeful

GMT 13:38 2017 Monday ,06 March

Prepares to give stargazers an eyeful
Arab Today, arab today Jaguar displays XF Sportbrake line

GMT 14:36 2017 Monday ,08 May

Jaguar displays XF Sportbrake line
Arab Today, arab today BMW sees forecasts in reach

GMT 09:04 2017 Thursday ,04 May

BMW sees forecasts in reach
Arab Today, arab today Climate science: Bad news gets worse

GMT 08:48 2017 Saturday ,06 May

Climate science: Bad news gets worse
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday