Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
GCC banks have sufficient headroom to navigate the developments in the region, supported by strong financial buffers and resilience measures, S&P Global Ratings said in a report.
GCC banks maintained effective operations by putting in place continuity measures despite the ongoing crisis. “Financial buffers maintained by banks should be able to help the region’s banks navigate the situation for now,” S&P Global Ratings said.
S&P Global said in an assessment of the situation: “Our base-case scenario is that the most intense part of the conflict will last around two-to-four weeks although we recognise that broader spillovers and intermittent security incidents could extend beyond this period.”
The agency said banks across the GCC have activated business continuity plans, ensuring that operations remain largely uninterrupted. Institutions have relied on diversified infrastructure, including multiple data centres and backup systems, allowing them to switch operations seamlessly in the event of disruptions.
Importantly, S&P noted that banks have not experienced any significant funding outflows so far, underscoring the stability of the sector. “We understand that major outflows of foreign or local funding have not yet occurred,” the report said.
The agency added that even under stress scenarios, the region’s banking systems demonstrate strong resilience. External liquidity levels are sufficient to absorb significant hypothetical outflows without the need for government or external support in most GCC countries.
On the domestic front, S&P’s stress tests indicate that banks are well positioned to manage potential deposit outflows. The report said banks collectively hold about $312 billion in cash or central bank balances, broadly matching potential outflows, and could mobilise up to about $630 billion after liquidating investment portfolios if required.
The rating agency also highlighted the strong institutional support framework in the region, noting that several GCC governments are highly supportive of their banking systems and are expected to provide extraordinary support if required. Regulators have already stepped up supervision and indicated their readiness to assist banks if needed.
