Amidst the debt restructuring controversy created by Dubai a few days ago, several banks in Dubai were downgraded by Standard & Poor’s due to their exposure to the troubled Dubai World, which just a few days ago asked that the redemption of about $4bn of sukuk, or Islamic bonds, be moved to next year, instead of the supposed December 14 deadline.
Emirates NBD, Dubai Islamic Bank and Mashreqbank were downgraded to near-junk status. FT further reports:
In addition to the three Dubai banks, institutions in neighbouring Abu Dhabi – primarily Abu Dhabi Commercial Bank and First Gulf Bank – are thought to be exposed to Dubai World’s debts.
While analysts stress that UAE banks are largely well capitalised, after injections of federal deposits and extra core capital over the past 12 months, many are worried that the fallout from Dubai’s credit woes will hurt the local financial system – just as it was showing signs of improving.
The whole story from the FT.