Standard & Poor’s, the rating agency, downgraded a clutch of major Dubai banks on Thursday due to their exposure to a troubled state-owned conglomerate, and warned further demotions could come soon.
The decision by Dubai World, a flagship government holding company of developers, ports operators and investment companies, to restructure $26bn of its debts has shocked financial markets and rattled regional and international financial institutions, which had expected government support.
While concerns over international banks such as HSBC, Standard Chartered and Royal Bank of Scotland – all major lenders in the United Arab Emirates – are easing, bankers remain worried that the restructuring could lead to painful losses at smaller, more heavily exposed local banks.
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