Doha: In a separate research note on “Assessing concentration risks in GCC banks” the IMF noted that Banks in the GCC face concentration risks in their credit portfolios.
While the GCC banks have credit exposures to different sectors of the economy, even the non-oil sectors are dependent on developments in the oil sector, either directly or through government spending. This economic structure constrains the ability of banks to truly diversify their credit portfolio.
GCC banks’ gross exposures are concentrated in claims on corporates, Sovereigns, and public sector entities. The largest asset class in GCC banks’ gross exposure consists of claims on corporates. The more than 50 percent share of claims are on corporates, sovereigns, and public sector entities.
Credit exposure to the government sector is important for some banks in Qatar and UAE. Exposure to financial institutions is also important for some banks in Qatar and UAE. Relatively high concentration in real estate/construction is present again in some banks in Qatar, Kuwait, Oman, and UAE, while personal credit is most relevant in Oman.
The labour market structure in the GCC contributes to a heightened exposure of banks to oil sector developments. With banks mostly lending to nationals, and nationals mostly working in the government sector , banks’ personal lending is importantly exposed to oil developments affecting government employment and wages.
The average share of nationals employed in the public sector is over 60 percent (and varies between 85 percent for Qatar and 35 percent for Bahrain), while, on average, 17 percent of total employment is in the public sector.
Oil revenues fuelling public sector wages and employment in turn fuels personal credit, increasing banks’ indirect exposure to the oil sector. The Peninsula
