MANAMA, 13 August 2007 — Bahrain, being the financial center in the Middle East, is not likely to be hit by the looming credit crisis, senior bankers and experts suggested yesterday.
Martin Fish, CEO Bahrain and regional head Northern Gulf and Levant, Standard Chartered Bank, said that plenty of liquidity in the region would guard against any direct impact of the crisis.
He added: “There is plenty of liquidity in the Middle East so the economies here should not be materially affected. As we have seen, however, risk premiums will widen and some debt issues may be delayed for a while.” Central banks around the globe pumped billions of dollars into banking systems on Friday in a concerted effort to beat back a widening credit crisis, and they pledged to do more if needed.
In all, central banks in Europe, Asia and North America have pumped out more than $300 billion over 48 hours in an effort to keep money flowing through the arteries of the global financial system, hoping to prevent a credit market seizure that could imperil economies.
In a rare statement of reassurance that underlined the seriousness with which it views the current bout of market stress, the US Federal Reserve said it would provide cash as needed to ensure markets functioned smoothly. The statement was the first of its kind since Sept. 11, 2001, when terror attacks brought the US financial system to a virtual halt.
Kamal M. Quadir, head of Structural Finance at Bahrain-based Capital Management House, said that those investing heavily in the US markets, mortgages and CBOs might feel the heat of the crisis.
“I don’t think that the Bahraini market or system will be affected by this adverse development. However, I believe that the companies with a wider exposure to the US market are likely to be hit by this crisis and not every one Bahrain,” he said. “The firms like Investcorp, DP World and other firms in the region involved in huge acquisition business may face problems but overall the situation will remain clam and under control. Similarly, the Dubai based Bank Istismar-Barney deal may be affected as in such deals usually the financing comes from the banks and if there is crisis, it will impact the process of lending.”
In worst scenario, according experts, the debt portion of acquisitions will be a concern for businesses in such situation and may cause some problems if it persists for long.
The central banks in the region are not in hurry to make any decision on the spillover of the crisis and are watching the developments after the central banks have come forward to bail out the banking system from a persistent credit crisis.
The Fed conducted three separate operations on Friday, pumping a total of $38 billion into the banking system, the largest amount for any single day since Sept.19, 2001.
The US central bank was not alone in its market-bolstering exercise.
The European Central Bank injected 61.05 billion euros ($83.61 billion), less than the record-setting 94.8 billion euros ($130.6 billion) it provided on Thursday but enough to steady panicky euro-zone credit markets. The Bank of Japan, the Bank of Canada, the Swiss National Bank and the Reserve Bank of Australia also provided funds.
