How bad is bad?

How bad is bad?

Although UAE banks haven't announced the extent of their exposure to the Saad and Algosaibi groups' fiascos, the central bank governor announced "there will be full disclosure" soon.

July 16, 2009 2:59 by Dana El Baltaji

The UAE Central Bank met with commercial banks on Thursday to discuss their exposure to the Saad and Algosaibi groups’ fiasco, reports Reuters.

“The meeting is on the invitation of the central bank, mainly to review exposure of UAE banks to the Saad/Algosaibi groups,” an Abu Dhabi-based banker, who is attending the meeting, told the news wire.

Debt restructuring at both Saad Group and Ahmad Hamad Algosaibi and Bros Group, both Saudi-based family firms, has shaken the region’s financial stability. According to documents obtained by Zawya Dow Jones, GCC-banks exposure may be as high as $2.54 billion, almost a third of the $7.42 billion in syndicated loans given to both Saudi firms.

The report claims that 88 companies worldwide are exposed the firms’ financial fiasco.

It is uncertain how much of the $7.42 billion both Saad Algosaibi groups have retained.

The UAE central bank governor, Sultan bin Nasser Al Suwaidi told reporters in Abu Dhabi on Wednesday that there has been “very little” coordination between the UAE and Saudi Arabian central banks “because they consider it an inheritance problem.”

As for local banks’ exposure, the governor said: “We will announce the percentage of total banks’ (exposure to Saad Group and Al-Gosaibi) and then the amount, so there will be total disclosure. The market wants to know.”

“It’s an exposure UAE banks can and have provided for,” Suwaidi said.

Meanwhile, the Saudi government has formed a dedicated panel to oversee the restructuring of the Algosaibi conglomerate, reported Reuters on Monday. The panel’s role, however, is unclear.

“The government committee that was formed is continuing its works and it summons the interested (parties) whenever the need arises,” Mohamed Salem Al Hindi, vice president of Ahmad Hamad Algosaibi and Brothers, told al-Hayat newspaper.

The Saudi central bank froze Algosaibi Group’s accounts last month indefinitely.

The Saad and Algosaibi groups’ fall-out is the most significant blow to hit the region since the financial crisis began. An initial estimate by regional analysts put world banks’ exposure to the Saudi-firms at $15 billion; however, HSBC dismissed that estimate, calling it “pessimistic.”