Moody’s said that the impact of the bankruptcies of Signature and Silicon Valley banks in the United States is likely to be limited for most of the rated banks in the Gulf Cooperation Council countries.
This is mainly due to the structural features of these banks, including their strong commercial franchises and the support they receive from their governments. Also, Gulf banks are not physically exposed to bankrupt US banks, and they are also not subject to large losses from debt securities that they own until maturity. However, the indirect effects of the US banking crisis are still developing.
The agency stated that the banks of the Gulf Cooperation Council countries are closely linked to the sovereign entities. For the most part, the imprint of governments can be found on the balance sheets of these banks, as these entities are among the main borrowers, depositors and shareholders, creating a supportive and interdependent operating environment.
Governments provide lending opportunities to banks in the Gulf Cooperation Council countries, which play a pivotal role in implementing the agenda of diversifying the components of the government economy in the non-oil sectors of the economy, as they represent the bulk of lending activities supported by government spending, especially in Saudi Arabia.
All these factors ensure that Gulf banks remain at the core of the region’s economies and will protect them from sudden market shocks.