To prevent a re-occurrence of any crisis, it is essential to apply the lessons learnt.

The main lesson taught by last year’s debt defaults at two Saudi family owned businesses showed was that the practise of ‘name-lending’ – where loans are agreed based on the strength of reputation alone – is fraught with risks.

The traditional lack of disclosure in the kingdom has allowed some conglomerates in recent years to rack up huge debt with relative ease, overleveraging far beyond their capabilities. This is not a problem unique to the kingdom, nor family owned firms. Throughout the Arab world, companies have been allowed to avoid scrutiny and overextend themselves and now banks are paying the price.

The global financial crisis has not only raised concerns over the region’s customary lending habits, it has also raised the much wider issue of corporate governance.

A culture of secrecy pervades the region, largely because many companies are affiliated to prominent families and as such are wary about public disclosure.

Neglect of basic corporate best practice may have been acceptable when the region’s economics were less developed, and less integrated with the rest of the world. But in the wake of the crisis and the high-profile debt problems in Saudi Arabia and Dubai, international lenders have understandably grown more cautious in lending to the region and are demanding more clarity on ownership structures, how the money will be used and how loans will be repaid.

A shift to complete openness is still a long way off, but pressure for greater disclosure is mounting. Having been caught out lending on trust once, banks cannot afford to do so again. And companies will have to accept that.