Deposits in Gulf banks increase amid unrest

Banks in the Gulf Cooperation Council (GCC) countries, excluding Bahrain, had \"substantial deposit inflows\" from outside the region this year amid political unrest, Standard Chartered Plc said. The UAE and Saudi Arabia, the GCC\'s largest economy, had the biggest gains, analysts led by Victor Lohle said in an e-mailed report on Friday. \"The recent inflows are sustainable, in our view, unlike the speculative inflows in 2007 that were betting on a break in the peg between the US dollar and the UAE dirham,\" the report said. \"This time around we think the funds are ‘stickier\' because they are searching for a safe haven and are not speculative in nature.\" If conditions remain volatile in the Middle East, it\'s unlikely that the funds will return home imminently, the report said. The regional unrest that has toppled presidents in Egypt and Tunisia and has spread to Syria, Bahrain, Yemen and Saudi Arabia, is prompting wealthy people from the most troubled countries in the Middle East to turn to more stable markets such as the UAE. Deposits held by UAE banks increased 7 per cent to Dh1.123 trillion during the first five months of the year, surpassing the increase for the whole of the previous year, according to data from the UAE\'s central bank. Banks are investing most of the funds in regional bonds with short maturities and spreads have widened, particularly in Abu Dhabi and Qatar, the report said. Companies and governments in the GCC have sold $9.5 billion of bonds this year, compared with $7.6 billion a year ago, according to data compiled by Bloomberg. Borrowers from Abu Dhabi have been the most active, raising $6.2 billion through seven issues. From / Gulf News