UAE banks told to reveal exposure to Phoenix Commodities

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Phoenix Commodities, Abu Dhabi Islamic Bank, RAK Bank, National Bank of Umm Al Quwain, Commercial Bank International

Dubai - The rice trading firm went into liquidation after it accrued $450m losses from currency hedging trades undertaken by the currency derivative desk of its subsidiary company in Dubai.

By Waheed Abbas

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Published: Mon 11 May 2020, 6:38 PM

Last updated: Mon 11 May 2020, 8:40 PM

Banks in the UAE have been asked to disclose their exposure to major rice trading firm Phoenix Commodities after it went into liquidation over the weekend.

Four lenders - Abu Dhabi Islamic Bank, RAK Bank, National Bank of Umm Al Quwain, Commercial Bank International - on Monday said in their statements sent to Abu Dhabi bourse that they didn't have any exposure to Phoenix.

Other banks and financial institutions are expected to announce their exposures in the coming days. People privy to the matter said banks which have got significant trade finance divisions will have a significant exposure to Phoenix.

Prior to Phoenix, UAE banks were asked to disclose their exposures to London-listed NMC Healthcare and Finablr. The UAE banks had announced over Dh10 billion exposure to NMC alone.

The rice trading firm went into liquidation after it accrued $450m losses from currency hedging trades undertaken by the currency derivative desk of its subsidiary company in Dubai. However, once full investigation of the case is done the real facts will get unearthed, as it is unlikely that a derivatives desk trader of the company kept on accruing such high value of losses in the derivatives market without the approval of the company's promoters and senior management.

Mayank Sawhney, managing director at MaxGrowth Consultancy, said total exposure of Phoenix to banks and financial institutions is estimated at $1.6 billion. The exact estimate of the exposure of the UAE banks to Phoenix has not been quantified yet, but it is estimated currently at around $400 million.

"The remaining $1.2 billion estimated exposure is that of international banks and financial institutions based out of UK, Singapore etc. However, as in the case of NMC Healthcare and Finablr, we may see a significant change in these reported numbers of Phoenix, once all UAE banks as well as international banks and financial institutions officially report their exposure to Phoenix Group," said Mayank.

waheedabbas@khaleejtimes.com


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