“Back to basics” was the main theme of a major international Arab banking summit held in London called to address the workability and likely impact of the “post-crisis strategies” presented before the G20 meetings that took place earlier this year.
The choice of the UK capital to host the event was by no means insignificant. In fact, it was intended to illustrate both the strong ties that exist between Arab and UK banks and, more importantly, the fact that confidence in British banking is still strong in the region despite the recent global financial crisis.
Held over two days on 25 and 26 June at London’s Waldorf Hotel, the gathering was organised by the Union of Arab Banks (UAB) in association with the World Union of Arab Banks and the European Banking Federation. The summit took place under the patronage of UK Prime Minister Gordon Brown, who was thanked by the organisers for his support.
The resilience of the Arab economies in the face of the global crisis was strongly underlined at the summit.
The event sought to address the fallout from the recent crisis, to develop joint solutions to ensure that a similar situation never happens again and to ensure that a clear Arab voice is heard internationally on these vital questions.
Changes in the operations of the major global financial institutions were urgently required in order to ensure future financial and economic stability, it was suggested. The banking industry worldwide needed major restructuring and the practises implemented over the last decade needed to be rethought, conference delegates were told.
It was pointed out by speakers that the developing economies, including those in the Arab world, had been adversely affected by decisions taken elsewhere and over which they had little influence. Furthermore, many economies were disproportionately affected and lacked the resources to make a recovery without assistance.
Influential keynote speakers included the Investment Minister of Egypt, H E Dr Mahmoud Mohieldin, Syria’s Minister of Finance, H E Mohammad Al-Hussein, and Rt Hon Lord Davies of Abersoch, the UK Minister of Trade, Investment & Business.
Other speakers included H E Dr Umayya Salah Toukan, Governor, Central Bank of Jordan and H E Dr Sinan El Shabibi, Governor, Central Bank of Iraq.
In his opening remarks, Adnan Yousif, chairman of the UAB, said that growth in the Middle East was expected to be 2.5 percent in 2009, and better than this in 2010, which contrasted to the negative growth that the major economies of the US and Europe expected to experience this year.
Yousif stressed that Arab banks were improving their competitiveness and playing a more dynamic role in the world economy than in the past. They were looking to new partnerships especially with the UK.
There were now some 420 banks in the Arab banking sector of which 80 are listed as among the top world banks in 2008, according to The Banker magazine.
The Arab banks remained mostly well capitalised and their profits were solid, Yousif said. They had demonstrated considerable growth in 2008 reaching a total in excess of $2.3 trillion, an increase of 15 percent on the previous year and they expected to achieve better results in 2009.
Nevertheless, Arab banks still needed partners to develop the skills and expertise of banking personnel.
The speaker identified opportunities for more investment and to diversify into more development banking. In addition, the expertise of the Islamic banking sector needed to be deepened.
For the UK, Lord Davies, who was appointed Minister for Trade on 5 June in the latest cabinet reshuffle, welcomed the conference and looked forward to closer cooperation between the UK and Arab banking institutions in future.
He felt that London would remain a key global financial centre; it was the leading Western centre for financial services, including Islamic products, whose growth had been facilitated by the UK government. However, he reassured delegates that things would never go back to how they were as the lessons of the recent crisis had to be learned and adjustments made to procedures for risk, governance and more transparency.
Lord Davies said the strong relations between the UK and Arab financial institutions would continue as there were immense opportunities for partnership and investment on both sides.
The minister urged Arab banks to invest more in the UK economy and announced that he would soon be launching an initiative with UKTI to attract more Arab investment into the UK.
Lord Davies said that the UK had taken action in response to the banking crisis and was looking what lessons can be learned with a view to implementing the appropriate reforms to the system. He felt that one obvious lesson was that there was a need for better international cooperation as it had become clear that the world system was not united enough. It would not be possible to adopt only UK, EU or US solutions; what was required was one standard worldwide.
Another lesson was that the demands of shareholders had been out of line with the boards of the banks, the minister said.
During discussion, the minister indicated that the UK was open to new ideas and proposals to do what was required to develop Islamic financial services in the country.
In his keynote address, the Egyptian investment minister said that the impact of the financial crisis was not confined to the banking and financial sectors. While it was legitimate to question the extent of the role played by the market, what was needed was a mixture of the state and market in the economy, he said.
H E Dr Mahmoud Mohieldin also warned that large deficits in US and Europe would have a negative impact on developing economies by reducing the amount of investment available on the world market. Finally, he said that the “new global reality” would see Asian countries such as India and China playing a much greater role in the world economy.
In his address, the Syrian finance minister pointed to the prompt action taken by the Arab governments to mitigate the potential repercussions of the crisis and he called for representation of the developing countries at international summits where vital decisions are taken.
A panel discussion addressed the next step in G20’s agenda to achieve the aim of strengthening transparency and accountability, enhancing sound regulations, promoting integrity in financial markets and reinforcing international cooperation. In particular, the conference addressed the likely impact of the new regulations on the Arab economies.
A further panel discussion looked at corporate governance, accounting standards and financial systems. This considered the importance of tightening the limits on financial systems including the activities of hedge funds, which are currently unregulated investment funds. The need for improvements in accounting standards for the valuation of financial instruments was also discussed as well as the importance of enhancing the capacity of banking boards for the oversight of risk.
A reception for delegates to the summit was held at the Arab-British Chamber of Commerce hosted by the Arab Bankers’ Association, whose chairman George Kardouche was one of the speakers at the conference.Global Arab Network
This report will appear in the latest issue of Arab-British Business, the fortnightly bulletin of the Arab-British Chamber of Commerce.