Outlook Bright for Middle East Banking Sector

Published October 15th, 2009 - 12:16 GMT

After successfully weathering the global financial crisis, the Middle East banking sector is poised for growth in light of widespread regional market reforms and global structural changes favouring the region, said HE Dr Omar Bin Sulaiman, Governor of the DIFC and Vice Chairman of the UAE Central Bank.

“During a period of great strain on financial systems across the globe, markets, governments, regulators and institutions here in the Middle East have responded professionally and appropriately, working in concert to steadily bring this region through the most serious test ever of its systems and structures. The legacy of this experience is improved policymaking and more powerful monetary policy tools,” Dr Omar said during the opening keynote address to the Banking Outlook Middle East 2009 conference, which opened today in Dubai.

“We now are in a position to declare with a great deal of confidence that the region has successfully passed through the worst of the crisis without experiencing any systemic risks. This is a great accomplishment and speaks well about the future of this region and this industry,” he told the audience of banking CEOs, chief economists and regulators.

Other important factors in the region’s ability to come through the global crisis and ensure the stability of the system included the growing importance of Islamic finance within the regional banking sector, generally prudent lending and conservative investment policies among banks, numerous market reforms and effective policymaking at the height of the crisis, Dr Omar said.

“The crisis proved to be a watershed in the history of Gulf central banks and government policymakers in terms of growing their monetary and fiscal policy toolkits,” Dr Omar said, “as global and regional market conditions required bold intervention into domestic financial markets in order to influence credit, liquidity and the money supply.”

As for more structural reasons for optimism about the Middle East banking sector’s future, Dr Omar referenced a study by the DIFC Authority’s Economic unit that said that Gulf countries held “transformative” levels of wealth in their hydrocarbon reserves that would provide a nearly unmatched level of long-term financial stability and carried positive implications, not only for the banking sector, but for the real economy as well.

He noted that regional banks will benefit from the shifting east of the global economic centre of gravity, a trend that began two decades ago but has been speeded up by the global crisis. In fact, since 2000, emerging market economies have been the main drivers of global economic growth, accounting for more than 60 percent of global economic and trade growth over the past six years. The role of China and India in helping the world economy come out of the current global recession only reinforces this trend, he said.

“Middle East banks, with their close proximity to Asian markets, are ideally positioned to link up with partners in China, India, Central Asia, and other areas to provide the financing that will fuel the strong growth anticipated in emerging markets for years to come,” Dr Omar said, adding that this trend is demonstrated in Dubai by a continued increase in the number of firms, including Asian firms, seeking and receiving licenses to operate from the DIFC.

Banking Outlook Middle East 2009 is a leading industry conference for CEOs, chief economists and regulators that focuses on strategies and opportunities in commercial, investment and retail banking.


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