British banks were teetering on the brink of a fresh meltdown today after it emerged they had invested heavily in crisis-hit Dubai.An $80billion debt default in the emirate has already reawakened the spectre of a global ‘double dip’ – that the first shoots of recovery could be wiped out by a second wave of recession. But the level of exposure that the crippled British banking sector faces is now under renewed scrutiny. The crisis was prompted by Dubai World, the development company behind three palm shaped islands as well as an off-shore replica of the globe, defaulting on its debt.
Today it emerged that:
* Royal Bank of Scotland (RBS) was Dubai World’s biggest loan arranger since January 2007, according to JP Morgan
* HSBC has an estimated £9.6billion in loans and advances to UAE customers
* Barclays has an exposure of around £3billion
The figures are particularly alarming as the sector has had to be bailed-out by the tax payer on a number of occasions over the last year-and-a-half. Earlier this month, RBS and Lloyds Banking group received another £50billion to keep them afloat. RBS – which has received the biggest state rescue anywhere in the world – is now effectively owned by the taxpayer. As the money markets continued to falter, Gordon Brown moved to dispel investors’ panic, claiming that he believed British banks were ‘well-capitalised’. Speaking at the Commonwealth summit in Trinidad, Mr Brown said: ‘I think we will find this is not on the scale of the previous problems we have dealt with.’ Asked if the Dubai situation could spark a ‘double-dip’ recession, he said: ‘You are obviously going to have setbacks with a bank here or an organisation there which has had problems, but I do believe the world has a better way of monitoring what is happening, so we can be sure that – despite setbacks – we will continue to go forward.’ Stock markets around the world have endured another turbulent 24 hours. Wall Street plummeted 2 per cent when it opened at 2.30pm GMT this afternoon. In London, the FTSE fell around 1.5 per cent first thing after a 3 per cent fall yesterday wiped almost £44 billion from blue-chip stocks. This just goes to show that we are anything but out of the woods yet in the global economic recession. Article by Liz Hazelton. (link: http://www.lewrockwell.com/spl/double-dip-depression.html)
