‘GCC banks need to spend more on risk management’


31/01/2012 11:28 AST  Gulf Times

The Gulf Cooperation Council (GCC) banks are well capitalised but they need to invest more in risk management to ensure long-term sustainable growth, according to Moody’s Analytics.

Moody’s Analytics, a subsidiary of global credit rating agency Moody’s, is also open to partnering with Qatar’s credit bureau for strengthening the qualitative research.

“Banks in certain GCC countries are very well capitalised. But that is only half of the story,” Moody’s Analytics London-based senior director Charles Stewart told Gulf Times on the sidelines of the ‘GCC Risk Management Symposium’, organised by the Qatar Financial Centre Regulatory Authority.

Observing that the availability of data was a very common problem for the banks throughout the Gulf region, he said financial institutions were beginning to build robust data so that they can quantify their risks and can also manage the risk profile much more effectively.

On data management and pooling, he said the quality was also important and it is where the credit bureaus come into play.

Qatar had last year established its credit bureau; a move aimed at enhancing the credit profiling of customers and enhance the quality of credit as well as to ensure transparency and market discipline.

“We are open to partnerships. We have partners around the world,” he said when specifically asked whether Moody’s Analytics would collaborate with Qatar Credit Bureau.

Referring to the Basel III norms, which is not an end in itself; he said there is a rising recognition on the need for embracing it for better data, governance and transparency, which are critically important for the sustainability of the financial services industry in the (Gulf) region.

Although the broad contours (of Basel norms) were same for the banks in the region as well as elsewhere, he said tailoring needs to be done and it is what the regulators were broadly engaged in.

Stressing that risk management has been pushed to the fore and is clearly an area of focus, he said investment in risk management would not only ensure sustainable profits but also bring in competitive advantage.

In many aspects, GCC banks have been investing very well but they have a long way to go and part of it is in the creation of historical data, according to Stewart.

Asked about the economic costs associated with such investments, he said it would vary depending upon the size of the banks and said any expenditure towards would generate a return that was in excessive of the costs.

The banks would need to make upfront investment to build the risk infrastructure but once it is made, they would be able to undertake stress tests and remain competitive as well as ensure growth on a sustainable basis.

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