#ADIB CEO warns of "irrational exuberance" as banks accept margin compression to grow corporate businesses #IFG The warning from Tirad Mahmoud relates to the perils of a highly liquid banking system with many small conventional and Islamic banks. The lack of consolidation can lead to behavior that is individually rational but destabilizing for the market as banks accept lower margins to attract more business. For the economy as a whole, it is likely to lead to too many loans being made without enough return to compensate for the risk the banks are taking. The best answer to the problem is consolidation into fewer, larger banks and a market with slightly less competition, even if it means higher financing costs for businesses and fewer loans made.
Posted on: Tue, 06 Aug 2013 20:39:35 +0000
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