Standard & Poor's Ratings Services today published a commentary report on the quality of bank accounting and financial disclosure in the Gulf Cooperation Council (GCC) countries. The report emphasizes the need for further refinement and harmonization of accounting practices in the region, despite encouraging achievements over the past decade.
"As far as accounting practices and financial disclosure are concerned, GCC banks represent some of the most advanced financial institutions in emerging markets in general, and in the Arab world in particular," says Standard & Poor's credit analyst Anouar Hassoune. "Most of them have adopted International Accounting Standards (IAS) over a period of several years and reached an adequate level of financial disclosure," he adds.
Standard & Poor's considers the major banks of Saudi Arabia and Kuwait to be the most advanced institutions in the region with respect to IAS compliance and overall quality of financial disclosure.
"IAS are also applied in other GCC countries," points out Emmanuel Volland, a co-author of the report, "but additional disclosure—particularly in terms of asset quality, provisions, capital adequacy ratios, and quarterly financial statements—remains necessary."
One recurrent weakness in the region is the poor disclosure of banks' shareholding structures. In addition, information on corporate clients remains weak and a large source of risk for the banks.
Capital markets depend on the confidence of investors, which in turn depends on the accurate, timely, and thorough public disclosure of companies' finances. Adequate accounting practices and financial transparency are the linchpins of a banking sector.
GCC members include the Kingdom of Bahrain (foreign currency rating A-/Stable/A-2), the State of Kuwait (A+/Stable/A-1+), the Sultanate of Oman (foreign currency rating BBB/Stable/A-3), the State of Qatar (foreign currency rating A-/Positive/A-1), the Kingdom of Saudi Arabia (not rated), and the United Arab Emirates (not rated). — (menareport.com)
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