UAE and Saudi Arabia expect limited Brexit impact

26 June 2016

Central banks of the two largest Gulf economies are monitoring the post-Brexit situation

Saudi Arabia and the UAE, the two largest economies in the GCC economy have said they do not expect their banks and financial institutions to be significantly affected by the UK’s vote to exit the European Union.

Saudi Arabia, the world’s biggest oil exporter, has said it has already made some adjustments to assets denominated in UK pounds and euros in anticipation of the vote.

The kingdom had been monitoring the situation and made the changes as a “precautionary stance,” Saudi Arabian Monetary Authority Governor Ahmed al-Kholifey was quoted as saying by state news agency SPA.

“It is too early to judge the lasting impact of the exit of the UK from the European Union, whether on the British economy or on the European, and therefore on financial and investment markets,’’ the central banker said, adding that for the banking sector, “we expect that the impact will be limited, because it is less exposed to the two aforementioned currencies’ movements’’.

Saudi Arabia’s foreign assets are mainly denominated in US dollars, in the form of securities such as US Treasury bonds and deposits with banks abroad.

UAE Central Bank also said any impact on the banks and financial institutions in the country would be limited.

“Due to the limited interconnectedness between the UAE and UK financial systems, there are only few channels through which uncertainty about future UK and EU relations could affect the UAE financial institutions,” central bank said in a statement, asserting it would continue to monitor developments.

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