Twelve banks in the six-nation Gulf Cooperation Council had about $4 billion of their Tier II bonds placed on watch for a possible downgrade at Moody’s Investors Service due to new capital rules that may come into effect.
While government support for banks in the GCC monarchies is high, the review of these debt ratings is “driven by the growing risk of bail-ins for subordinated debt instruments,” Moody’s said in an e-mailed statement today.
Bail-ins provide governments with an alternative to taxpayer-funded rescue of banks. Claims of subordinated creditors and even some senior creditors may be written-down in a bail-in to stabilise a bank that may be facing insolvency.
The banks affected are Arab National Bank, Banque Saudi Fransi, Abu Dhabi Commercial Bank PJSC, Emirates NBD PJSC, First Gulf Bank PJSC, Mashreqbank PSC, Commercial Bank of Qatar QSC, Doha Bank QSC, Qatar National Bank SAQ, Burgan Bank SAK, Bank Muscat SAOG and and BBK B.S.C., according to Moody’s.