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THE REGION'S BANKS DECIDE THE RETURN OF THE ECONOMIC RECOVERY
Oliver Wyman Consulting saw that governments will need to work with banks together, to absorb financial losses and protect commercial interests from bankruptcy and accelerate economic recovery, pointing out that the experience of banks in financial restructuring will become increasingly important, in addition to its critical function in debt trading and financial markets.
Matthew Faso, head of financial services at Oliver Wyman for the Middle East, said that the impact of the global financial crisis in 2008 in the Gulf countries was limited, given their banks' limited exposure to the mortgages that caused the crisis, and thus was largely isolated from the crisis at the time.
As for the economic crisis today due to "Corona", it will have a great impact on the countries of the region. The economic impact on the Gulf states is exacerbated by the 60% drop in oil prices, which will lead to a negative impact on their credit and corporate solvency in a significant way.
He added: To support economic growth out of the current crisis, the Gulf authorities should recognize the crucial role that banks can play and take the following measures:
1- Correcting the track on providing credit to small and medium-sized companies
Most of the lending incentives do not reach the right companies, and fixing this requires evaluating the availability of credit and the operational capacity of the banking system and finding quick solutions. Financial authorities should simplify measures or expand the scope, which includes these companies.
2- Preparing to manage a large solvency crisis after financial support
Financial authorities in the Gulf region will need to assess the readiness of the bankruptcy system in each country and the potential impact of credit losses on their banking systems, and make strategic decisions about how and what kind of capital stimulus is needed by troubled companies that can drive future growth.
3- Preparing to interfere in parts of the financial system in the event of problems with financial stability
The Gulf financial authorities must be ready to intervene, especially in the event that some financial institutions continue to be weak or fail. These efforts, if achieved, may constitute a real test, which will be done for the first time in many Gulf countries.
4- An experiment to absorb losses in the event of a future recurrence
The participation of governments, companies, investors and banks in planning recovery and recovering countries from their economic crises has become urgent today to stimulate confidence in credit and achieve growth.
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