Arab finance leaders will meet in Abu Dhabi today to discuss the creation of early warning systems to guard against future financial catastrophes. Governors from central banks and monetary agencies from 22 countries will attend the annual meeting of the Council of Governors of Arab Central Banks and Monetary Agencies, organised by the Arab Monetary Fund (AMF).
The meeting comes days after G20 leaders agreed to tighten international regulations governing the financial sector to reduce the chances of a repeat of the global financial crisis. Banks in the Middle East have been affected by exposure to falling asset prices and from the debt restructuring of the Saad and Al Gosaibi groups of Saudi Arabia. In response, the council will discuss a paper from the Arab banking oversight committee, recommending the formation of "early warning systems" for financial institutions.
"There's a number of risks you would want to monitor to ensure they (financial institutions) meet acceptable parameters, that includes maturity risk, liquidity risk and foreign currency risk," said Giyas Gokkent, the chief economist and head of research of the asset management group at National Bank of Abu Dhabi. Finance leaders will also consider a study prepared by the AMF in conjunction with the World Bank recommending the creation of a mechanism to clear payments more efficiently between Arab nations to promote inter-Arab investment.
Sheikh Salem Abdulaziz Al Sabah, the governor of Kuwait's central bank, will present a paper explaining what steps the country is taking to stabilise the financial sector in the wake of the financial crisis. Dr Nasser Saidi, the chief economist of the Dubai International Financial Centre, said last week the Gulf needed to establish a regional supervisory framework for the banking system. He advocated the creation of a college of banking supervisors to exchange information on cross-border exposure and better supervise lending.
Gulf economies have been hurt this year by both the global financial crisis and homegrown troubles emerging from Saudi Arabia's Saad and Al Gosaibi family-run conglomerates. The groups owe an estimated total of US$3 billion (Dh11.01bn) to banks in the UAE, with another $5bn believed to be owed to lenders in Saudi Arabia. International banks will be forced to more than double capital levels for the riskiest parts of their businesses as part of the major regulatory measures agreed by the G20 summit in Pittsburgh last weekend. The overhaul forms part of a plan to bolster the global banking system to withstand shocks and reduce its reliance on government financial support if a future crisis occurs.
The council holds annual meetings to exchange information on central bank functions within the Arab world and collaborate on international monetary issues. The AMF has 22 member states and was established in 1976 to improve monetary and trade co-operation across the Middle East. tarnold@thenational.ae