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GCC gov'ts far from resolution regimes for conventional, Islamic banks - S&P

GCC gov'ts far from resolution regimes for conventional, Islamic banks - S&P
Regulators have enhanced their monitoring and supervision methodologies

Mubasher: GCC banks adopt many of the best practices and international regulations when they are put into effect, but the region's governments take a long time to implement resolution regimes, S&P Global Ratings said in a report on Monday.  

On the back of the 2008 financial crisis, finance ministers of G7 countries, comprising Canada, France, Germany, Italy, Japan, the UK and the US, agreed to use all of the available instruments in an effort to support some systemically important financial institutions and prevent their failures, the report showed. 

“In order to minimise the need for government intervention and related costs for taxpayers, regulators have enhanced their monitoring and supervision methodologies, revamped on-site examination processes, and, in many countries, expanded their toolkit to process orderly resolutions of systemically important banks,” the report said. 

Although GCC governments have taken a slew of these steps, they are still away from implementing resolution regimes for both the conventional and Islamic banks, the report titled “Recovery And Resolution Regimes In The Gulf Cooperation Council: More Questions Than Answers” said. 

"In our opinion, such implementation would require a significant change in mentality and the governments' approach toward their banking systems," said Mohamed Damak, S&P Global Ratings' head of Islamic finance.

"The effective introduction of recovery and resolution regimes for Islamic banks would hinge on clarifying which instruments will absorb losses other than in the event of default," Damak noted.