Tuesday, October 21, 2008

Local banks made margin calls in wake of Lehman bankruptcy

Zawya: A banker pointed out that banks need money.
Some banks have huge investments either in local property financing or global stock markets, and these investments exceed banks' capabilities, so they are going in for long-term products with a higher interest rates to drag money in.

Varouj Narguizian, General Manager of Bank of Sharjah, said: "I suppose what happened is that these banks have received margin calls to cover their situations especially in the global stock markets as a result for the recent credit crunch. What they did locally is that they transferred their problem to their investors."

He said if the situation continues it will negatively impact the local banking sector and will lead to a deeper liquidity gap even with the government efforts to support the market with huge amounts of money.

Narguizian believes that banks should have been transparent about their investments to the investors. He urged investors who cannot comply with the margin call to approach the UAE Central Bank.


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