Wednesday, 4 May 2011

FT Alphaville » Bahrain bank flight, quantified

Q. What happens when your prized offshore banking system is occupied by Saudi Arabia?

A. This:

(Click to enlarge)

The tables above are from the Bahrain central bank’s financial statistics for March 2011, a month in which the political unrest facing the country peaked, and Saudi troops moved in.

The data show the state of assets and liabilities of wholesale banks in Bahrain. While we’d note that this kind of figure is naturally wont to vary from month to month, you can see the significant decline in March. Indeed total assets fell 10 per cent, to $134.9bn, as Reuters reports. Assets in foreign banks as well as liabilities via foreign non-banks also record notable declines, as highlighted.

So what, you might ask. Bahrain is already doomed in its bid to become the financial centre of the Gulf.

True, but we almost wonder whether more money would have sucked out but for the Gulf states’ decision to hold Bahrain in a brutal embrace. After all, most of these banks have ties to other lenders in the region, and it’s certainly not unusual for Gulf banks to subordinate business to political bonds when asked — viz. the Dubai World debt work-out where bank loans were restructured but bondholders (and Dubai political pride) generally kept whole.

The data won’t tell us but it’s something to consider.

Autocracy and offshore. Hell of a combination.

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