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Blown billions, Part II
Banks in the Gulf and beyond are reeling from Saudi Arabia’s Saad and al-Gosaibi scandal. We look at the web of relationships behind a dispute that will change the way business is done in the region, reports Trend magazine. Part II
October 17, 2009 9:27 by Ehtesham Shahid
The lack of public communication by the two groups led to “a degree of panic,” and the rumor mill went into full swing when the banks themselves made only “sketchy disclosures” in response, according to a July 6 report from EFG-Hermes, a Cairo-based investment house. “As news flows on the magnitude of loans gained pace, banks across the region were initially hesitant to disclose the size and nature of their exposures [to AHAB and Saad Group]. In the absence of any formal disclosures by the banks on the size and nature of their exposures to the two business groups, we believe that speculation will continue to increase,” the report said.
Today, even while the full extent of the damage is still unknown, the focus is beginning to shift towards the long-term consequences. The scandal couldn’t have come at a worse time for the region, which has already been hit hard by the global credit crunch. Banks have now become even more wary about lending to family businesses, which account for a large portion of the private sector in the region.