UK Minister heads to Saudi Arabia over banking dispute

Post #318,408 by jay 12/10/09 2:19:41 PM Reply	UK Minister heads to Saudi Arabia over banking dispute http://business.time...rticle6946728.ece Lord Davies of Abersoch, the Trade Minister, flew to Saudi Arabia last night to try to defuse a growing dispute that bankers say could do as much damage to the GulfÂs bruised financial reputation as the Dubai shock of ten days ago. Bankers are furious that two defaulting Saudi conglomerates that owe $20 billion (£12.2 billion) appear to be favouring local banks over foreign creditors. State-owned Royal Bank of Scotland, HSBC and Standard Chartered are all understood to have exposure to Saad Group and Ahmad Hamad Algosaibi & Bros (Ahab). Dozens of other Western banks are also owed money, including Citigroup and BHP Paribas. The defaulting businesses are big messy companies, and there is a maze of competing claims, possible lawsuits and criminal investigations. But what has the big companies in the US and UK up in arms is that the Saudi conglomerates seem to have cut a deal to restructure there debt with local banks, while leaving the international banks with nothing. This is a serious issue, because if countries begin favoring local investors over outside investors, it will lead to reduced investment and higher investment costs. Banks making loans will want higher interest rates to compensate for the lower chance of getting paid, outside investors will want stronger contracts and more direct control, and so on. Not to mention that a bunch of big investment banks are going to be out a lot of money. Jay
Post #318,410 by drook 12/10/09 2:28:45 PM Reply	Will it really reduce investment, or just move it around? There are a limited number of people and corporations with billions of dollars looking for a place to park it. And a limited number of places to put it. (The limited places to put it are in fact the source of the CDO market.) I have to assume that there is a rough correlation between the amount of investable money in a country and the available investments in that same country. In general, rich people like to live where there are other rich people to hang out with. So if international investment becomes a bit more expensive, won't that simply mean more money staying closer to home? And if I'm right that available money and places to put it are roughly matched up in each country, then the total investments in each country should stay about the same, just with more local investors and fewer international. Yes, this is a huge oversimplification, and there are a ton of consequences. But people with money to invest are going to find a place to put it. If local options are the lowest-cost option, they'll take local. -- Drew
Post #318,420 by boxley 12/10/09 5:36:39 PM Reply	good article in the economist slightly OT concerning foein investment and India http://www.economist...story_id=14753808
Post #318,423 by static 12/10/09 6:51:55 PM Reply	It kind of makes sense. The local banks are the ones your employees and customers are probably going to be doing business with. And they also probably know where you live, where you shop and where you play. Sure, annoying the international banks can upset international politics, but for most people, that's outside their daily life. Wade. Q:Is it proper to eat cheeseburgers with your fingers? A:No, the fingers should be eaten separately.

Welcome to IWETHEY!