US banks have just US$13B exposed to UAE

As nervous as I was on Friday morning about the ability of global banks to duck the impact on a payment standstill at Dubai World (see prior post “Eid’s pause won’t help Western Banks as Dubai reels” Nov 27-09), the U.S. stock markets seemed to sluff it off during the holiday-shortened day. Certain U.S. Bank shares came off a bit, but the Canadian contingent actually traded higher on the day.

Courtesy of the NYT, I now can spread the word that U.S. banks have but US$13 billion of exposure in the United Arab Emirates according to the Bank of International Settlements. Of the seven Emirates of the UAE, it can only be assumed that Dubai, and not Abu Dhabi, is the primary borrower of the Gulf nation.

Compared to US$51 billion held by British banks, US$13B doesn’t sound like much. Although the majority of the British banking system is owned by the U.K. government, exposure is still exposure. But let’s look at the big American names:

Bank of America: US$257.7B
Citibank: US$140.8B
Goldman Sachs: US$65B
JP Morgan: US$162.2B
Wells Fargo: US$122.2B

Total equity: US$747.9B

Good news, even if the entire US$13B exposure was wiped out, it would erase but 2% of the capital at these firms (assuming they held the vast majority of the Dubai loans). Makes you feel as though you can sleep at night…except for the exposure that the American banks have to Barclays, Royal Bank of Scotland and Standard Chartered.

HSBC itself has US$17B exposed to the UAE (14% of its equity), more than the dollar value of the UAE exposure of the entire American banking system.

Makes you wonder.

MRM