According to local media reports, the total value of bonds listed on Nasdaq Dubai by the ICBC reaches $4.56 billion from nine issuances. All the bonds were issued by the Chinese bank’s branch in Dubai. 

The two bonds were listed on October 17, 2019. The listings reflect the financial and economic relationship between Dubai and China. China is the UAE’s largest non-oil trading partner. Nasdaq Dubai is the international financial exchange in the Middle East. ICBC is the world’s largest bank by assets. 

Earlier this month, DP World listed a $500 million sukuk and a $500 million conventional bond on Nasdaq Dubai. DP World is a global port operator formed by Dubai Ports Authority and Dubai Ports International. It is also the UAE’s largest debt issuer by value with sukuk and conventional bond listings totalling $9.09 billion, the media reported. 

Another bank that listed sukuk on Nasdaq Dubai is Kuwait’s Warba Bank. The Kuwaiti lender listed $500 million sukuk on the exchange this month. It is the second Islamic bond to be listed by the lender, after the listing of a $250 million instrument in March.

Shaheen Al-Ghanem, Chief Executive of Warba Bank, told the media that, “The Sukuk attracted investors from the GCC, the wider MENA region and beyond, underlining the confidence of the market in Warba Bank’s dynamic expansion strategy in business sectors including investment, corporate and retail banking.”

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Such a change in ranking would lead to additional capital requirements for the banks in question as an insurance against failure and the subsequent ripple effects through the global economy. But, in this case, a Citigroup spokesperson commented that they are already subject to high capital requirements laid down by the Federal Reserve: “The GSIB measure announced this morning by the FSB does not have an impact on any of Citi’s binding regulatory metrics.”

Capital buffer
The Basel-based FSB will, from January 2018, require Citigroup Inc. to hold a 2.5 percent capital buffer in comparison to the 2 percent called for in the previous year while Bank of America is now required to keep 2 percent compared to last year’s 1.5 percent. Wells Fargo’s capital buffer level went up to 1.5 percent from 1 percent, which was the level required last year.

Morgan Stanley, Barclays and HSBC lie on the other side of the spectrum in this regard, having been adjudged to be less risky to global financial stability as compared to last year. These banks have managed to better their position largely by selling off part of their riskier businesses or reducing the size of some of them.

The case of Deutsche Bank too is of note as the entity had been named the greatest systemic risk to international financial stability last year. With a capital requirement of 2 percent, it remains in its middle-tier position.

The basis of FSB’s decision
The board’s decision was based on ‘data quality improvements, changes in underlying activity and the use of supervisory judgment’, going by a press release. According to the Financial Times, ‘people familiar with the move’ said the decision came on the back of a surge in the value of the US dollar, which then resulted in a heightening of American banks’ risk profile.

The Trump effect
It is also of note that the higher risk rankings came shortly after Donald’s Trump’s election victory. Trump has promised several times to do away with Dodd-Frank, a law that seeks to mitigate the systemic risks – those that set off the 2008 financial crisis – posed by America’s large banks.

A note on Trump’s website reads: “The Dodd-Frank economy does not work for working people. Bureaucratic red tape and Washington mandates are not the answer. The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”

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