MANAMA, 2 November 2007 — The excess liquidity in the Middle East and timely intervention of central banks have mitigated the impact of credit crunch due to subprime mortgage crisis in the US.
Naim Abou-Jaoude, chairman of the executive committee of Dexia Asset Management and member of the executive committee of Dexia Group, said that the global growth forecast of 4.5 to 5 percent per annum was still healthy.
Speaking on the sidelines of the Fund Forum, he said given size of the market, the losses can easily be absorbed by the affected institutions. “Earning per share and corporate earning are solid and the global economy is not in recession as predicted at the start of the financial crisis,” he said.
Naim Abou-Jaoude, joined by Firas Mallah, head of Middle East Dexia Asset Management and who is based in Bahrain, said that the injection of cash by the central banks, interest rates, soundness of institutions and excess liquidity are the main pillars which have minimized the impact of this financial crisis which is considered the worst in the last 30 years.
Naim said the losses caused by this subprime mortgage crisis would be somewhere between $100 to $150 billion, a figure seen as insignificant when you see the size of the market or even the size of institutions involved in. He said that there was a need to see more robust regulations related to CDOs and CBOs.
“This is what you may call more transparency while dealing in CDOs and CBOs, this is a much-awaited initiative as far the as the business of subprime mortgage is concerned.”
Naim suggested that more communication between the institutions and regulators and stringent regulation can avert any possible future crisis of this nature. “Though the losses are not much higher, there are important lessons to learn from this adverse type of situation and that can be achieved through transparency in dealing and openness.”
Talking about Dexia Asset Management, Naim said the Middle East, which sits on $2 to $4 trillion assets, would continue to be a prime focus for Dexia to offer products, services and expertise.
Mallah said the Middle East operations established its presence in the Middle East by opening its first regional office in Bahrain in 2006.
“We have chosen Bahrain because of its strategic location and role as a leading financial center backed by a strong regulatory regime implemented by the Central bank of Bahrain.”
He said: “From Bahrain office we cover nine countries across the region: Saudi Arabia, Bahrain, United Arab Emirates, Kuwait, Oman, Qatar, Lebanon, Jordan and Egypt.”
The company offers global expertise along with a complete product range of tailor-made solutions and innovate investment vehicles. Dexia Asset Management has management centers in Brussels, Luxembourg, Paris and Sydney. It also has marketing teams in Belgium, France, Luxembourg, the Netherlands, Switzerland, Italy, Spain, Scandinavia, Germany, Austria, Australia and Bahrain.
