The United Arab Emirates may have to do more to support its banks and prevent the woes of a leading Dubai-owned conglomerate from causing losses and derailing a tentative economic recovery, according to bankers and analysts.
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 markets and rattled regional and international financial institutions, which had expected government support.
Standard & Poor’s, the rating agency, on Thursday downgraded a clutch of leading Dubai banks owing to their exposure to the troubled state-owned conglomerate, and warned further demotions could come soon. Fitch Ratings also put four banks on review for a downgrade on Thursday, including HSBC Middle East.
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