Financial firms up and down

More closures feared as BDL’s capital
increase requirements comes into effect

The balance sheet of financial institutions grew by 14 percent in 2012, closing the year at $1.2 billion, according to the latest figures by the Central Bank. Financial institutions had registered flat growth over the previous few years. Ahmad Khatib, CEO of Amana Capital, said: “During 2011 new financial institutions entered the market. This resulted in a growth in the sector’s aggregate balance sheet as their figures were included.” However, he said the growth in the balance sheet does not necessarily mean that operations grew at the same pace.

Liabilities to the private sector (similar to deposits) totaled $217 million, down by four percent year-on-year, while liabilities to the financial sector, mainly banks, jumped by 22 percent to $581 million. Capital accounts rose by 14 percent to $355 million. Other liabilities were up by 18 percent to $76 million.

The sector witnessed several license withdrawals during 2012, including that of AM Financials, Levantum, and Outlook Finance. Khatib said the local financial institutions market still lags behind most regional peers: “The local market is quite narrow with a limited vision.” In early 2012 the Central Bank (BDL) issued a circular amending the rules governing the sector. The new regulation, which became effective starting January 2013, divided financial institutions into three categories according to their scope of business. Accordingly, it assigned a new minimum capital for each category as follows: $1.2 million for brokerage firms, $3.2 million for financial institutions of limited operations, and $4.8 million for full-fledged financial institutions. Khatib said some companies have already closed down and merged their operations with other firms. "More closures are expected. Many institutions that do not meet the new criteria will have to close down soon, mainly firms that have their operations concentrated locally,” said Khatib.

On the assets side, cash and banks’ balances grew by 11 percent year-on-year, to $474 million. Claims on the private sector grew by 18 percent to $637 million. Claims on the public sector jumped by 29 percent to $137 million. According to BDL lists, there are 53 financial institutions and 12 brokerage firms operating locally.