ABU DHABI: Arab central bankers, grappling with the impact of the global financial crisis and a corporate debt scandal in the Gulf region, want a global “early-warning system” for financial institutions, the head of the United Arab Emirates central bank said.

But as the Arab Monetary Fund holds its annual meeting in Dubai on Monday, Gov. Sultan Nasser Al-Suweidi said it was unlikely there would be major progress made, citing Western reluctance.

Emerging market states have been vocal in their criticism of Western financial firms, holding them largely responsible for the crisis which wiped trillions off global markets and sent economies tumbling into recession or facing severe downturns. The crisis prompted central banks to slash interest rates as governments poured funds into financial sectors, and provided emergency loans and guarantees to restore credit flow.

Central bankers and the heads of monetary agencies from 22 Arab states will discuss the creation of the warning system. “It is put on the table for discussions. We discussed it in April at the IMF/World Bank meetings, there was absolutely no answer from the Western central banks,” Al-Suweidi said. “I don’t think we will be finding a solution today.” The meeting comes as Arab states wrestle with the economic crisis and follows a summit that thrust the G20 group of countries, which includes Saudi Arabia, onto center stage as the body to lead global economic coordination.

Meanwhile, Saudi Arabia and some other Arab countries voiced cautious optimism that economies were on the mend, with the UAE seeing an improvement in lending conditions and liquidity.

Oil producers in the Gulf region have boosted spending with Saudi Arabia, the biggest Arab economy, alone committing more than $400 billion to underpin growth.

Muhammad Al-Jasser, governor of the Saudi Arabian Monetary Agency (SAMA), said there were no signs of contraction in the local economy. “There is no contraction in the local economic indicators,” he said. The UAE, the second-largest Arab economy, said lending conditions and liquidity were improving but conditions remained fragile. “The gap between loans and deposits is narrowing because liquidity is steadily improving but I think the economic situation in the UAE and other countries is fragile,” Al-Suweidi of the UAE bank told reporters.

The UAE economy might shrink or grow slightly in 2009, Al-Suweidi said. “Growth will be small if there is any,” he said, adding that banks’ third- and fourth-quarter earnings could be lower due to the provisions as well as the global crisis. Banks across the Gulf region have seen earnings hit by provisions to cover their exposure to troubled Saudi conglomerates Saad Group and Ahmad Hamad Algosaibi & Bros. and central bankers have indicated more would be needed.

“We have advised banks for (first) half year results to up the provisions to 50 percent of exposures to the groups,” Bahrain’s central bank governor Rasheed Al-Maraj told reporters.

OPEC producer Kuwait said no local banks or investment firms needed financial help due to the economic crisis after it had to rescue major lender Gulf Bank a year ago. “At the moment there are no banks, no investment houses that need help according to law,” Central Bank Gov. Sheikh Salem Abdul-Aziz Al-Sabah said. Oil exporter Libya meanwhile said its gross domestic product would be above 2 percent this year, sounding more optimistic than the International Monetary Fund (IMF) predicting in June growth to slow to 1.1 percent from 6.7 percent last year.