Dubai's stock exchange has lost 12.5% this week
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The ratings agency Standard & Poor's (S&P) has cut the credit ratings of four Dubai-based banks because of their exposure to the debt-laden Dubai World. The banks are National Bank of Dubai, Dubai Islamic Bank, Mashreqbank and Emirates Bank International. Last week, Dubai World rocked financial markets after asking for a delay on repaying its debt. Fellow ratings agency Fitch has also said that it is considering downgrading ratings on some banks in Dubai. S&P said it had made the decision because of the banks' high exposure to corporate government-related entities, including Dubai World and its subsidiary Nakheel. 'Low' government support The agency has also downgraded six companies linked to the Dubai government to junk status. S&P said extraordinary support from the Dubai government seemed "low" after the emirate said it would not guarantee Dubai World's debts. S&P said it was not rating Dubai World or its property arm Nakheel. It said that under its criteria, a credit standstill - which is what Dubai World had asked for - "is considered a default". The firms downgraded were the ports operator DP World, DIFC Investments, Jebel Ali Free Zone, Dubai Multi Commodities Centre Authority, Dubai Holding Commercial Operations Group and Emaar Properties PJSC. UK exposure Separately, the Financial Times reported that Britain's banks were Dubai's biggest foreign creditors. The report said Royal Bank of Scotland had the biggest exposure, of up to $2bn. HSBC, Standard Chartered and Lloyds Banking Group had exposure of about $1bn each, according to the paper.
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