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Bahrain: Gulf International rescued from sub-prime losses

Lost a billion dollars in the US structured finance market? No problem: Daddy just received a huge bonus from the global economy and will give you $1 billion to cover the damage.

Pretty much what happened to Gulf International Bank last month.

GIB’s sub-prime losses were about four times as large as the next two biggest losses in the Middle East from the SIV/CDO freeze. But it took the write-down of $966 million in its stride, thanks to a cash-injection of $1 billion from the six Gulf governments that own it.

Of the three biggest sub-prime losses among Gulf banks, two were in Bahrain: GIB’s and Arab Banking Corporation’s $230 million. Kuwait’s Gulf Investment Corporation took the second-biggest loss, $246 million.

Why is this? And will these mistakes lead Bahrain to lose its status as the region’s financial centre to a more dynamic Dubai? After all, BNP Paribas is now the only global bank to base its key personnel in Bahrain.

GIB did not reply to Euromoney’s enquiries. But according to Asaf Mohyuddin, CFO at Arab Banking Corporation (ABC), Bahrain had a higher share of sub-prime losses than other Gulf states precisely because it is a regional financial centre.

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