UAE banks see 2.9 billion dollars at risk with two Saudi firms

Nov 19, 2009, 10:56 GMT

  Abu Dhabi - The Central Bank of the United Arab Emirates said Thursday that 20 banks operating in the country have a combined exposure of 2.9 billion dollars to two troubled Saudi Arabian business groups.

  The Central Bank ordered the 13 national banks and seven branches of foreign-headquartered financial institutions to take provisions by the end of the year for the financed and non-financed exposure to the Saad Group and the Al-Gosaibi group.

  A bank official confirmed by telephone a statement released overnight that said the central bank would continue to monitor the situation and might provide further guidance on allocations needed for balance sheets in 2010.

  Provisions of 50 per cent should be made for exposure to the two Saudi firms, and of 100 per cent for their subsidiaries, namely Saad's Awal Bank and Al Gosaibi's The International Banking Cooperation.

  The two firms, which are focused on construction but which also have financial arms, are locked in legal battles in the Gulf and have disputes in several other countries, including Switzerland and the United States.

The firms have leveled accusations of corruption against each other after they defaulted on loans and created ripple effects across the regional Gulf economy.

  Last week, a court in Abu Dhabi, the capital of the United Arab Emirates, froze the assets of the Saad Group and its partners, in favour of Abu Dhabi Commercial Bank, which was owed money.