GCC banks brace for consolidation on global crisis 

(MENAFN - Bahrain Tribune) The Kingdom's banking and financial sectors would witness a wave of consolidation in the next two to three months with a series of mergers and acquisitions becoming imperative in the face of global financial turmoil.

This was the forecast of the Kingdom's leading banker and chairman of Ithmaar Bank, Khalid Janahi.

"All these days, the region witnessed a banking boom with both small and big banks recording robust growth, as economies raked in the high crude prices. In the next couple of months, consolidation will be the name of the game in the Kingdom and the entire Middle East," he said, speaking at a luncheon organised by the American Chamber of Commerce in Bahrain.

"The world has changed in the last two months, since the breakout of the economic crisis."
He said creation of bigger financial entities in the region dissolving smaller players to face a possible downswing would become the order of the day. Regional banks and investment firms were bogged down by tight lending conditions and were more vulnerable to an economic downturn than ever.

The next line of disaster in the form of credit card derivatives also lay in waiting, he pointed out.

Gulf banks, he said, should be more proactive not only to tide over the global financial crisis, but also sustain growth in the long-term. "We only react to situations, never take the crisis head-on. It's time we take on the financial tsunami on our own. Do not wait for United States to revive. Blaming the United States was also wrong for all the ills in the financial system. At this juncture, we got to create our own map."

This was time to sift the regional financial market chaff, weeding out 'unreal, casino like dream economies' and working towards ushering in what he called real economies. "It's time we invested in real economies and infrastructure instead of derivatives and other speculative options that fuelled the unreal, dream economies."

Janahi said Islamic banking always looked into real economies, not speculative casino style finance. "Regional banks are better placed thanks to the Shariah-compliant banking model."

"Bahrain has always been a leader in the financial world with its regulations. Though small, we can set an example to the regional economies as well as the world. The coming months will undoubtedly bring about tighter regulations."

He suggested that it was also time for local financial institutions to bring pressure on the central banks and governments to bring the regional wealth back home. "Most of our wealth should be here at this crucial juncture, not elsewhere in financial seismic zones of the West. It's the right thing to do.

Towards that end, he said it was time for Middle East governments to pump in their reserves stashed away in American and European banks and funds, back into their economies.

Saying the storm was bound to blow over, he said the global players could find themselves back in real economies making clean and down-to-earth investments in two years time. "Global banks will begin going back to normality from next year."