UAE Ctrl Bk Concerned About Bks' Saudi Grps Exposure

The United Arab Emirates' central bank governor said Monday he was concerned about local banks' exposure to troubled Saudi conglomerates Saad Group and Ahmad Hamad Al Gosaibi & Brothers, or AHAB.

"We are dealing with it and we are concerned about it," Sultan bin Nasser Al Suwaidi told reporters in Abu Dhabi without providing more details.

However, Al Suwaidi added that he doesn't expect defaults of regional family-owned conglomerates such as Saad and AHAB to become a major problem going forward.

"I don't take this to be a trend, it happens. I don't think the issue is default, it is a decree for freezing. We don't know the circumstance that led to this freezing," Al Suwaidi said.

A London-based Saad Group spokesman and an Al Khobar-based AHAB spokesman weren't immediately available for comment when contacted by Zawya Dow Jones Monday afternoon.

The U.A.E. central bank last week ordered local lenders to halt loans to Saad and AHAB and one of its units after they faced difficulties meeting some of their debt obligations.

The development has raised concerns that some family-run businesses in the oil-rich Gulf have been heavily hit by the fallout of the world financial crisis.

In the U.A.E.'s banking sector, things are looking up, however, Al Suwaidi said.

"The banking sector is doing well. Liquidity has improved so the situation is better than at the beginning of the crisis," he said. However, he added that "for 2009, I don't expect banks' performances to be better than in 2008."

Regarding the U.A.E. finance ministry's plans to start selling federal bonds in the future to help fund budgetary spending on infrastructure, Al Suwaidi said: "At the right time it will be good to issue a federal bond."

-By Maria Abi-Habib, Dow Jones Newswires; +9714 364 4962; maria.habib@dowjones.com