See also
ABN deal exposed RBS to Dubai debt
Martin Flanagan - 04 December 2009Royal Bank of Scotland's exposure to the debt-ridden Dubai World is thought to have been inherited largely through its acquisition of ABN Amro in 2007.
Sources said it was a further evidence of the weakness of the deal secured by former RBS chief executive Sir Fred Goodwin as the liquidity crisis in financial markets unfolded.
Of the $40 billion (£24.05bn) of total Dubai World debt, sources said yesterday, RBS had an overall exposure of $1bn to $2bn.
HSBC, Standard Chartered and Lloyds Banking Group are said to have exposure of about $1bn each. All of the banks declined to comment.
However, sources said much of the UK lending to Dubai World is focused on parts of the business outside of the proposed $26bn debt restructuring, like ports operator DP World.
Of the firm's debts due to be restructured, RBS's exposure is believed to be about $700 million, and Standard Chartered's about $350m. One source said: "These figures sound about right. The likelihood is that the banks will take a bit of a haircut to keep Dubai happy, but, with Abu Dhabi's support, hopefully the restructuring will be sensible."
Part government-owned RBS and Lloyds shares both closed up more than 4 per cent.
It is believed Emirates NBD is the biggest single creditor, with outstanding loans of $3bn.
UK banks have loans totalling $50bn into the United Arab Emirates, out of total loans of $123bn by international banks, according to statistics from the Bank of International Settlements.
Dubai World unveiled its debt restructuring plan on Monday, after worries about debt problems had shaken stock markets and creditor confidence since late last week.
The four UK banks are among six creditors who are leading a committee of Dubai World's creditors, which will meet the company next week, according to an Abu Dhabi bank executive.
The appearance of a gradually crystallising bailout for Dubai's problems following the emirate's breakneck expansion in the past decade helped to calm stock market jitters yesterday.
In London, the FTSE 100 index closed down ten points at 5317.26, while Frankfurt was off 0.2 per cent and Paris down 0.1 per cent.
As London closed, Wall Street was trading up about five points. The Japanese market closed up nearly 4 per cent.
One analyst said: "We are not out of the woods, but it seems the market no longer fears Dubai might be a Middle East version of Lehman's," referring to the US investment banking giant that collapsed in September 2008, sending shockwaves round the world.
Bonus row 'dragging bank's name through mud'
Small firms' champion Colin Borland yesterday accused Royal Bank of Scotland of "dragging the bank's reputation through the mud", writes Terry Murden.
His comments follow threats by the RBS board to resign if the Treasury blocks plans to pay out an estimated £1.5 billion in bonuses to staff in its investment arm.
Borland, public affairs manager for the Federation of Small Businesses in Scotland, said: "It is a real shame that, while one arm of RBS is publicising that it is treating small business customers more equitably with capped fees and a small business charter, another seems intent on further dragging the bank's reputation – and relationship with the small business community – through the mud.
"While inquiries take place at Holyrood and Westminster into banking in Scotland, many in the real economy still feel that they are paying the price for the Scottish banks' failures. Any progress to date made to rebuild RBS's reputation is at risk if the bank is seen to be being profligate while the real economy is still suffering."
Scottish Financial Enterprise, the body representing the sector, offered some support to the bank's board. A spokesman said: "This is a matter for RBS and the Treasury, but I would make two points: RBS made clear its gratitude to the government for the support it's been given; it is working flat out at restructuring its business for the future, and delivering for customers meantime. Announcements such as this week's new funding for small businesses make that clear.
"But it is an international company and is seeking to manage its operation within international banking parameters. It needs to do that to be successful for all shareholders, including the taxpayer."
See also:
Darien adventure repeated?
How the Masters of the Universe ran amok and cost us the earth
Prophet of doom
Mother of all carry trades faces an inevitable bust
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