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Ratings agency Moody’s says that persistently low oil prices will negatively impact banks across the GCC. This could result directly from a “weakening in governments’ capacity and willingness to support domestic banks,” and indirectly from a “weakening of banks’ operating conditions.” Moody’s warning comes at a time when more GCC states and private companies are looking to tap the international debt market to shore up their finances (see above).
Despite low oil prices and a high dependency on oil revenues in the GCC states, the ratings for banks in the region “continue to benefit from their governments’ willingness to tap accumulated wealth in order to support counter-cyclical spending,” Moody’s says in a report issued this week. But this dynamic cannot be sustained with continued declines in oil prices, says Khalid Howladar, Moody’s Senior Credit Officer.
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