MANAMA: The GCC financial sector is an antidote to the prevailing global economic malaise that is affecting financial institutions in the region, a senior banker claimed.
Abdul Hakim Khalil Al-Mutawa, managing director of Private Banking Group at Ithmaar Bank, called for a principle-based regulation for the regional financial sector.
“Governments in the GCC region should realign their economic priorities in such a way that it instills confidence in the region’s financial future. The process of ordering a system would be challenging to say the least, but a systemic deleveraging is necessary and inevitable.
“From the current economic crises it has become evident that a system based on rules and regulations is incapable of dealing with the complexity of the modern financial system. What is required is a regulatory mechanism that promulgates guiding principles, supported by strong disclosure and oversight,” Al-Mutawa added.
The knock on effect of the current global economic crisis has seen confidence eroding from the region mostly led by the fall of share markets across the region with real estate and banking stocks plummeting on investor fears.
Earlier last week the Gov. of the Central Bank of Bahrain commented on the exposure of Islamic banking entities to the global crisis and in the past few weeks, banks in the Gulf region went on to rake up losses in exposure to derivate products.
In a bid to instill confidence, the region’s central banks, have announced guarantees of deposits and have pumped liquidity into the market.
“These moves are likely to have limited impact. What we need today is long term, strategic and sustained measures to ensure the general health of the banking system and by extension the region’s economy and its’ continued prosperity,” said Al-Mutawa.
