Because of high instability, GCC banks will stop using hybrid capital instruments


(MENAFN) Gulf Cooperation Council banks are going to refrain from saving the hybrid capital instruments at the initial call date for the upcoming 12 to 24 months, thanks to the surging volatility, scarce liquidity and important surge in the cost of capital, as stated by S&P Global Ratings in its most recent report.

Interest rates in the Gulf have been surging rapidly as central banks matched course with the US in support of their currency pegs with the US dollar.

“Liquidity is becoming scarcer and more expensive, even in the Gulf. Current market conditions mean banks that replace an existing hybrid capital instrument with a new one could incur a significant increase in their cost of capital,” as stated by Mohamed Damak, primary credit forecaster at S&P Global Ratings in Dubai, in the report.

During the last 10 years, the GCC banks have indicated a marked preference for conventional and Islamic hybrid capital instruments, resulting in their impact to the overall attuned capital rising from 2.3 percent at the end of 2011 to stand at 13.5 percent as of Sept. 30, 2022.

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