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Arab Banking Sector Overcomes COVID-19 Adverse Effects

The Arab Monetary Fund (AMF) in Abu Dhabi (Asharq Al-Awsat)
The Arab Monetary Fund (AMF) in Abu Dhabi (Asharq Al-Awsat)
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Arab Banking Sector Overcomes COVID-19 Adverse Effects

The Arab Monetary Fund (AMF) in Abu Dhabi (Asharq Al-Awsat)
The Arab Monetary Fund (AMF) in Abu Dhabi (Asharq Al-Awsat)

The Arab Monetary Fund revealed that the banking sector in Arab countries has succeeded in overcoming the repercussions of the coronavirus pandemic without significantly impacting its financial institutions.

The sector continued to attract liquidity and investments, which boosted Arab economic growth.

The Fund added, in its Financial Stability Report in the Arab Countries for the year 2022, that the Arab banking system was stable and generally able to withstand shocks despite the developments, challenges, and economic shocks between 2013 and 2021.

The report stated that the banking system in Arab countries achieved good levels of capital, liquidity, asset quality, and profitability, reflecting the supervisory authorities' policies and efforts to ensure the financial sector's safety and enhance stability.

The report emphasized the resilience of the Arab banking sector and its ability to absorb financial shocks in general.

The Arab banking sector was characterized by solvency higher than those targeted internationally according to the Basel III standard of 10.5 percent, which indicates that the industry enjoys global solvency and enhances its ability to absorb any potential losses.

According to the Fund, the average solvency ratio of Arab banks reached 17.8 percent in 2021 and 2020, up from 17.7 percent in 2019.

The report pointed out that the Arab banking sector maintained reasonable loan provisions due to the implementation of the International Financial Reporting Standard (IFRS), which enhanced the strength and solvency of banks and improved the quality of the assets.

The Fund noted that Arab banks maintained good levels of liquid assets, ranging between 27.3 percent and 34.5 percent, which is one of the most critical indicators that measure the ability of banks to meet their obligations based on high-quality and liquid assets.

It pointed out that the rate of return on assets in the Arab countries improved last year, recovering to the pre-coronavirus levels, noting that the Financial Stability Task Force in the Arab State conducted partial and total sensitivity tests on 80 percent of the entire Arab banks.

The report assumed that the economic developments related to the pandemic might increase credit risk, credit concentration risk, exchange rate risk, interest rates, and liquidity.

These tests showed that the Arab banking sector is solid and achieved positive results in most tests.

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US Locks in Steep Tariff Hikes on Chinese Imports

Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)
Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)
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US Locks in Steep Tariff Hikes on Chinese Imports

Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)
Stacked containers and cranes are shown at the Port of Los Angeles in Los Angeles, California (AFP)

The Biden administration on Friday locked in steep tariff hikes on Chinese imports, including a 100% duty on electric vehicles, to strengthen protections for strategic domestic industries from China's state-driven excess production capacity.

The US Trade Representative's office told Reuters that many of the tariffs, including a 100% duty on Chinese EVs, 50% on solar cells and 25% on steel, aluminium, EV batteries and key minerals, would go into effect on Sep 27.

The USTR determination showed a 50% duty on Chinese semiconductors, which now include two new categories - polysilicon used in solar panels and silicon wafers - are due to start in 2025.

Adjustments to the punitive “Section 301” tariffs on $18 billion worth of goods announced in May by President Joe Biden were minimal and disregarded auto industry pleas for lower tariffs on graphite and critical minerals needed for EV battery production because they are still too dependent on Chinese supplies.

USTR left unchanged the tariff increase to 25% from zero on lithium-ion batteries, minerals and components, with the increase for batteries for EVs taking effect Sep 27 and those for all other devices, including laptops and cell phones, on Jan 1, 2026.

Lael Brainard, the top White House economic adviser, told Reuters that the decision was made to ensure that the US EV industry diversifies away from China's dominant supply chain.

She said such “tough, targeted” tariffs are needed to counteract China's state-driven subsidies and technology transfer policies that have led to over-investment and excess production capacity.

But Washington is investing hundreds of billions of dollars worth of its own tax subsidies to develop domestic EV, solar and semiconductor sectors.

“The 100% tariff on electric vehicles here does reflect the very significant unfair cost advantage that Chinese electric vehicles in particular are using to dominate car markets at a breathtaking pace in other parts of the world,” Brainard said.

China has vowed retaliation against the “bullying” tariff hikes and argued that its EV industry's success is due to innovation, not government support.

The higher US tariffs take effect as Vice President Kamala Harris and former President Donald Trump are both courting voters in auto and steel producing states, trying to position themselves as tough on China ahead of the November presidential election.

Trump has vowed to impose 60% tariffs on all Chinese imports.

The European Union and Canada also have announced new import tariffs on Chinese EVs, the latter matching the 100% US duties.

The final tariff decision does provide some temporary relief for US port operators who were facing a new 25% tariff on massive ship-to-shore cranes, an industry that China dominates with no US producers.

The duty would add millions of dollars to the cost of each crane.

USTR said it will allow exclusions from the tariffs for any Chinese port cranes that were ordered prior to the May 14 initial tariff announcements, as long as they are delivered by May 14, 2026.

USTR raised tariffs to 50% on medical face masks and surgical gloves, from an initially proposed 2%, but delayed their start to allow a shift to non-Chinese suppliers.

The planned duty on Chinese syringes, which were in short supply during the COVID-19 pandemic, will immediately rise to 100% from a previously planned 50%, but USTR will allow a temporary exclusion for enteral syringes, used to feed infants, for a year.

The agency also said it will consider requests for tariff exclusions for five Chinese industrial machinery categories, including those for machinery for purifying or filtering liquids, industrial robots and printing machinery.

It will allow tariff exclusions for Chinese solar wafer and cell manufacturing equipment, but not for equipment used to make full solar modules.