The lack of a GCC-wide response to the financial troubles facing Saudi Arabia's Saad and Al Gosaibi groups is posing a risk to regional financial institutions, a senior banker warned yesterday. Saad Group, a US$30 billion (Dh110.16bn) empire chaired by the Saudi billionaire Maan al Sanea, had its accounts in Saudi Arabia frozen by the kingdom's central bank last month, triggering fears that lenders across the Gulf may have had exposure to the company.
The UAE Central Bank also ordered banks to halt loans to Mr al Sanea and three private Saudi businesses, Dow Jones reported yesterday, citing sources. "If there were a legal infrastructure in place on how to deal with these issues then there would be a quicker resolution, and with that a quicker recovery," said Giyas Gokkent, the chief economist at the National Bank of Abu Dhabi. "The fact that there is no unified response poses more systemic risk."
Ratings agencies downgraded the Saad Group to default status following its earlier announcement that it would be restructuring its debt. The Saudi group Ahmad Hamad Al Gosaibi Group and Brothers, which owns a majority stake in The International Banking Corporation, based in Bahrain, is also restructuring its debt. Both groups have released little information on their debt restructuring. "GCC countries need to harmonise their response to these types of issues," said Mr Gokkent.
"This region is lacking the legal infrastructure to deal with something like this, and if it had one it would allow for a quicker recovery." Regulators should demand more clarity from family-owned businesses, he added. Yesterday, a senior Moody's official said the Saad Group had the ability to meet its liabilities. "This is a voluntary default," said Mardig Haladjian, the head of GCC banks at Moody's Investors Service.
"They took the conscious decision to stop all payments. It is 100 per cent viable for them to repay their obligations." Mr Haladjian said that Saudi banks might have decided to freeze all corporate accounts belonging to the Saad Group as a precautionary measure. It followed an earlier decision by the Saudi Arabia Monetary Authority (SAMA) to freeze the personal accounts of Mr al Sanea. * with agencies