Lord Davies of Abersoch, the Trade Minister, flew to Saudi Arabia last night to try to defuse a growing dispute that bankers say could do as much damage to the Gulf’s bruised financial reputation as the Dubai shock of ten days ago.
Bankers are furious that two defaulting Saudi conglomerates that owe $20 billion (£12.2 billion) appear to be favouring local banks over foreign creditors. State-owned Royal Bank of Scotland, HSBC and Standard Chartered are all understood to have exposure to Saad Group and Ahmad Hamad Algosaibi & Bros (Ahab). Dozens of other Western banks are also owed money, including Citigroup and BHP Paribas.
Bankers suspect that the two family-owned businesses, which defaulted over the summer, have privately reached agreement with local Saudi banks over restructuring their loans while leaving foreign banks in the cold. One senior banker told The Times yesterday: “Local banks appear to have been given preference.”
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