Standard & Poor’s Global: Gulf banks will remain immune to #Silicon_Valley and “Signature Bank” default infection risks. Gulf banks have limited lending activity in the United States, and most of their assets are in debt instruments of high credit quality.
The Gulf banks will remain immune to the risk of contagion from the collapse of “Silicon Valley Bank” and “Signature Bank” in the United States, and will not be affected by that crisis, as confirmed by the “Standard & Poor’s Global Ratings” rating agency. credit.
The collapse of regional banks in the United States last week, and the subsequent sharp decline in shares of the troubled Credit Suisse Group, rocked global financial markets and raised widespread fears of potential repercussions for banks around the world, despite of the efforts made by the US government to contain the crisis and restore stability in the country.
Two days ago, as a result of the collapse of Credit Suisse shares, 3 Arab institutions considered among the bank’s largest shareholders incurred $8 billion worth of unrealized losses, before the bank’s shares returned and recovered relatively supported by bailout efforts, which included borrowing about $54 billion from the Swiss National Bank, as well as offering to buy back debt
Standard & Poor’s Global Ratings said in a report that the 19 banks it rates in the Gulf region have no or limited exposure to regional lenders in the United States, noting that there is strong support for those rating institutions. the US government that is interested in preventing the spread of infection risk
The US support, led by the Treasury Department, along with the Federal Reserve Bank and the Federal Deposit Insurance Corporation, included a promise from the government to protect depositors’ money and lend to banks in problems, which resulted on Thursday in providing $ 30 billion loan to First Republic Bank, with participation Major US banks.
Standard & Poor’s Global Ratings indicated that the exposure of the Gulf banks to the US market as a whole is 4.6% on the asset side and 2.3% on the liability side, according to figures at the end of 2022. These figures reflect the average exposure of Gulf Countries banks, which ranges from zero to 22% on the asset side, and from zero to 11.4% on the liability side.
Among the 19 banks, only 5 banks have about 5% of their assets in the United States, while only 4 banks owe about 5% of their liabilities (liabilities) to other parties in the United States, according to the agency.
Controllable accounting losses
Standard & Poor’s Global Ratings said in its report: “In general, Gulf banks have limited lending activity in the United States, and most of their assets are in debt instruments of high credit quality, or with the Bank of the Federal Reserve”. He added that the US portfolios of the Gulf banks “contributed to unrealized losses, but it appears that the total amount can be controlled.”
It is also important, according to the agency, to note that the unrealized losses are not all related to risks in the United States, but are related to bank investments in general, including debt instruments in the Gulf Cooperation Council countries. , whose fair value decreased due to the fact that the central banks of the region increased interest rates.