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Banking consolidation in the GCC requires attention to competition

Pietro Calice's picture
Also available in: Arabic | French
National Bank of Abu Dhabi - Ijanderson977 (Own work) [Public domain], via Wikimedia Commons
National Bank of Abu Dhabi, UAE. Photo: Wikimedia Commons

Gulf banking markets may have entered an important phase of consolidation, with the potential to dramatically reshape both the role and the intermediation capacity of the industry. A few days ago, two large banks in the UAE, National Bank of Abu Dhabi and First Gulf Bank, agreed on a tie-up to create a national champion and regional powerhouse with $170 billion in total assets. In Oman, Bank Sohar and Bank Dhofar are in advanced merger talks. Bank mergers are expected to take place in Bahrain and Qatar as well.

The protracted downward trend in oil prices is threatening economic growth and fiscal sustainability in the region. This is having an impact on the banking systems. Banks are increasingly facing pressure on liquidity in the face of both private and public deposit outflows. This coupled with a low interest rate environment in the context of pegged currencies is eroding margins. Capital buffers are strong yet asset quality may deteriorate if oil prices remain low for a prolonged period and economic growth decelerates further. Therefore, in a context largely characterized by fragmented markets, consolidation may help achieve efficiency gains and ultimately preserve financial stability.

However, it is important that banking consolidation in the Gulf does not come at the detriment of competition. International experience shows that healthy bank competition generally promotes access to finance and improves the efficiency of financial intermediation, without necessarily eroding the stability of the banking system. Bank competition in the region is traditionally weak largely due to strict entry requirements, restrictions to bank activities, relatively weak credit information systems, and lack of competition from foreign banks and nonbank financial institutions. While increased market concentration does not necessarily imply greater market power, there is a risk that the current and prospective wave of industry consolidation may have long-lasting negative effects on competition if left unchecked.

Terrorism makes stability more important to Arab youth than democracy

Christine Petré's picture


Young Arabs express the same concern over the rise of the Islamic State (IS) as young people do elsewhere, the annual Arab Youth Survey reveals. For the second year in a row, the “rise of” IS militants is perceived as the main problem facing the region, with four in every five young people interviewed saying they were more concerned about it than other problems. Its public appeal may have also decreased slightly, findings in the survey suggest.

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Sameh Mobarek's picture
 Anton Balazh l Shutterstock/NASA

The Middle East and North Africa region has never faced such significant stress on its ageing infrastructure like it does today, with one of the most telling being the substantial increase in the need for electricity.  It is estimated that electricity demand in the MENA region will increase by 84% by 2020, requiring an additional 135 GW of generation capacity and an investment of US$450 billion.  The quest for new approaches to ensure adequate and reliable supply of electricity in the region is more urgent than ever before.

How the Middle East and North Africa can benefit from low oil prices

Shanta Devarajan's picture
AlexLMX l Shutterstock

The Middle East and North Africa (MENA) is a region of extremes. It has the highest unemployment rate in the developing world, with the rate for women and young people double the average. MENA economies are among the least diversified, with the Herfindahl index—a measure of the concentration of exports in a few commodities—ranging between 0.6 and 1 for most countries. The region had the highest number of electricity cuts per month. The ratio of public- to private-sector workers is the highest in the world.  While, until recently, the region had been averaging 4-5 percent GDP growth, that average masked a highly volatile growth path.

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Ibtissam Alaoui's picture
Moroccan Woman protesting - Arne Hoel l World Bank

The political participation of Arab women in post-revolutionary Arab countries has been the subject of various studies and academic research. The 2011 revolutions marked a significant shift in the female political role in the region because women were involved at the head of the Arab uprisings. The revolutions, which were initially secular and egalitarian, also unleashed long-repressed conservative forces, which have been eating in to the gains made by Arab feminists over the past decades.

Despite high education levels, Arab women still don’t have jobs

Maha El-Swais's picture


Thirteen of the 15 countries with the lowest rates of women participating in their labor force are in the Middle East and North Africa (MENA), according to the 2015 Global Gender Gap Report (2015). Yemen has the lowest rate of working women of all, followed by Syria, Jordan, Iran, Morocco, Saudi Arabia, Algeria, Lebanon, Egypt, Oman, Tunisia, Mauritania, and Turkey.

Why countries in Middle East and North Africa should invest in Youth Volunteering

Rene Leon Solano's picture


There were over 1,000 Lebanese youths together in one large auditorium, all from different communities, confessions and party affiliations. Some were chanting the Lebanese national anthem, waving the country’s flag. Others were holding hands, and screaming every time their pictures or that of their new friends appeared on a large screen. These young men and women all had one thing in common: they put aside their different socio-economic, religious, and political backgrounds and gave up their spare time to jointly identify and implement community projects across Lebanon.

Just across the Mediterranean – The Transition from COP21 to COP22

Jonathan Walters's picture
Rabat, Morocco - Arne Hoel l World Bank

France has just hosted COP21 to a very successful conclusion: the 2015 Paris Agreement. This achieved consensus among 196 countries on the most complex and challenging global issue of our time – climate change. It reconciled the widely different perspectives and interests of developing and developed countries, the North-South divide which has been at the heart of the failure to reach climate change agreement for twenty years. It makes global trade negotiations look easy by comparison. France should have every confidence in its diplomatic and political ability. Chapeau!

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Mohamed Younis's picture
Cairo's Tahrir Square, Egypt. Hang Dinh / Shutterstock.com

In the build up to the Arab uprisings, data was doing its part to deceive those who follow the region closely. Tunisia and Egypt provide great examples. Both nations closed the first decade of the century implementing the kind of classic economic reforms often praised by western-based multilateral and international organizations. Extremely qualified, intelligent and well-meaning experts on both countries took an objective look at reforms, GDP trajectories and other traditional metrics, such as infant mortality rates, poverty reduction, etc., and concluded that these countries, while not perfect, were moving forward along a path of increasing correction. A few weeks later, both nations were in complete political upheaval.  

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Simon Thacker's picture
Students on university campus - Shutterstock l Zurijeta

The world is fast.
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