Global Arab Network | Banks In North Africa Remain Resilient To Global Market Dislocations But Face Local Risks

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Banks In North Africa Remain Resilient To Global Market Dislocations But Face Local Risks

Global Arab Network - - Adam Turner

Tuesday, 28 April 2009 23:04

Banks in North Africa appear resilient to the global financial storm that has hit numerous financial institutions around the globe said Standard & Poor's Ratings Services in a new report, "Banks In North Africa Are Holding Up Under The Global Financial Storm But Face Local Headwinds."
Shielding banks that we rate in Morocco, Tunisia, and Egypt are restrictive local regulations as well as the relative underdevelopment of financial intermediation throughout North Africa.

"Indeed, these banks have no exposure to structured investment products, because local regulations are highly restrictive about the kind of asset classes that they can invest in abroad," said Standard & Poor's credit analyst Mohamed Damak.

However, new risks are emerging. North African banks are starting to feel the aftershocks of the global financial crisis on the real economy. North African economies are likely to hold up better than the ailing global economy, and will likely avoid recession, but they will experience, to various extents, a marked slowdown.

"The new environment represents a major test for the three banking systems that we cover," said Mr. Damak.

Banks in Morocco will have to cope with a likely acceleration of the correction of their real estate sector and the effects of the new environment on leading players' subsidiaries in Africa. In Egypt, the new operating environment will test whether and how well the sweeping reform of the banking will in practice work. In Tunisia, uncertainties about the performance of the tourism sector and other export-oriented sectors may put into question the strengthening of asset quality indicators in recent years.

"We do not expect the storm to significantly impair the financial profiles of the banks that we rate under our current assumptions but if the real estate correction in Morocco accelerates and economic conditions in Tunisia and Egypt worsen more than anticipated, we do not rule out negative rating actions," said Mr. Damak.

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