Thursday, May 11, 2006

UAE Central Bank and Euphemism City
Grin and don't bear it

Gulfnews: UAE queries banks' equity exposure :: "The Central Bank said in the letter that the information was intended to prepare for the implementation of Basel II risk management requirements and to allow banks to make better decisions on lending. . . . The UAE Central Bank has asked banks to report the level of their exposure to tumbling stock markets, bankers said yesterday. Institutions have lent heavily to finance investment in stocks, which have lost much of their gains from an oil-driven surge last year. Dubai's bourse is down 53 per cent this year and Abu Dhabi's market is has fallen 35 per cent."

No worries. The banks, I suspect, believe that if they get into difficulty there will be a bailout. As long as they get the upside and someone else takes the downside - the Rulers' Court? - they are being allowed to take risk without consequences.

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