Islamic banks are expected to play a stronger role in any new international financial order that could be spawned by the global economic turbulence, according to the Arab World's top banker.

Adnan Yousuf, Chairman of the Union of Arab Banks (UAB), said they had discussed the post-crisis role that will be played by Islamic banks and Arab traditional banking units in the European Union (EU) and key global financial centres during a visit by a UAB delegation to the EU headquarters in Brussels.

He said the UAB, which groups nearly 470 Arab banks, offered to undertake efforts to strengthen co-operation between the EU and Arab banks including attracting capital to both regions in the coming period.

In an article published in the June bulletin of the Beirut-based UAB, Yousuf said Arab Islamic banks had largely strengthened their position in the EU over the past three decades, surging by 15 per cent annually to 350 branches.

"The Islamic banking services industry has proved that it is a solid and powerful industry over the past 30 years. It is now poised to become one of the global economic powers in any new financial order," he said.

"The international financial system is currently passing through radical changes in its essence and infrastructure because of the crisis. These changes will directly and indirectly affect the Arab banking system. We believe that it is time for both Arab traditional and Islamic banks, particularly those which have established a strong presence in the EU market, to seize this golden historic opportunity and enter into the new financial order with full force... this of course should be done in co-ordination with the national central banks."

Yousuf said he had discussed such issues during recent talks in Brussels with EU Foreign Policy Chief Javier Solana, adding that the European official expressed readiness to support efforts to boost co-operation.

He added Solana was also "aware of the major role" which the Arab and Islamic banks in the EU can play in expanding financial ties between Europe and the Middle East, mainly in attracting investment and setting up joint ventures.

"From our part, we expressed our willingness to support any effort to strengthen co-operation between the EU and Arab banks in those fields in the post-crisis period. We explained the role that can be played by Arab banks in Europe to attract funds to finance development in our region," he said.

In separate comments, Yousuf urged Arab banks to take measures to boost co-ordination so they can play an active role in the new world economic order.

"All countries are expected to participate in the new world financial order, including the Arab states. The recent trips to the Gulf by several global officials represent a clear recognition of the role of regional states in tackling the current crisis. In recognition of such a role, they should be involved in forging the new global economic order on par with other nations," he said.

"In this field, Arab banks can play an effective role that will complement the role of their governments. Arab banks can offer a lot in this field but they need to take quick measures to expand co-ordination among them and act as a single Arab banking bloc. Arab banks are also urged to learn lessons from the current crisis by utilising it in developing their financial, technical and human resources."

Post-crisis role by the Arab banks in Europe was the theme of a conference organised by UAB in London this week and attended by representatives from most Arab and European banks as well as British and other officials.

It covered a host of issues, mainly co-operation between EU and Arab banks and European facilities for expansion of Arab banks there.

By Nadim Kawach

© Emirates Business 24/7 2009