State stakes in Gulf banks bring business advantages — and risks

State stakes in Gulf banks bring business advantages — and risks:

"In Europe and the US, state ownership of banks has been a painful experience. When they have been forced into each others’ arms by crises and bailouts, shame and blame are often inescapable, as are conflicts over whether rescued banks should be engines of government policy and social good or pursue maximum profits.

In the Gulf, state-owned banks have a much more harmonious relationship with governments. “Having the biggest banks in the Gulf Co-operation Council [GCC] mostly owned by their respective governments and/or ruling families certainly grants them a major competitive advantage,” says Elena Ponceca, an Abu-Dhabi based analyst at Al Ramz Capital.

“Not only do they have the firm support of the governments but they also stand at enviable vantage points when it comes to securing government business due to the strength of the relationships,” she adds. Examples of state support include government notes issued for UAE banks during the 2008 crisis."



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