JEDDAH, 24 February 2003 — Arab banks are likely to suffer losses of SR225 billion ($60 billion) in the event of a US-led war on Iraq, according to the Arab Bank Federation.
The potential losses to the Arab countries would be much higher than those suffered during the 1991 Gulf War, said Dr. Fouad Shakir, secretary-general of the federation.
Dr. Yaseen Al-Jefry, an independent economist, said the losses were estimated in light of the those likely to be suffered by Arab economies in general during the war as a result of diminished economic activity.
However, Saudi banker Mishter Al-Murshid discounted the fallout of a possible war as banks in Saudi Arabia and other Gulf countries are in an “excellent” state. “Even if the whole Gulf economy is affected, the banking situation will remain stable as Gulf banks enjoy high liquidity,” he explained.
Al-Jefry said the banks would suffer losses due to economic depression, but “the solvency of Arab banks and their capital strength will enable them to withstand the shock.”
Banker Talaat Hafiz said the figure was exaggerated as he does not estimate losses will exceed SR112.5 billion ($30 billion).
The Saudi Arabian Monetary Agency (SAMA) said earlier that it did not expect any major flight of capital from Saudi banks in the event of a war. Muhammad Al-Jasir, of SAMA, said the central bank is ready to meet any extraordinary demand for cash if war breaks out.
