Flip through the latest issue of Gulf Weekly.
Kuwait's struggle to prop up the Gulf Bank and Bahrain's effort to inject life into sinking BMB investment bank close on the heels of the Bahrain Investment Bank suffering liquidation cannot be looked as isolated incidents.
They may be just the tip of a deeper malaise that could have infected the whole GCC financial system.
Kuwait had to step in to save Gulf Bank after the country's fifth-largest bank by market value made losses on currency derivatives.
In Bahrain, regulators buried the failed Bahrain International Bank, which had for 20 years, symbolised the success of the kingdom's offshore banking sector.
BIB had generated significant losses and needed fresh equity injection, which apparently was not forthcoming.
BMB has also accumulated significant losses and is facing liquidity problems.
Some time back, BMB was looking to undertake a capital restructuring exercise where the accumulated losses would be set off against the capital of the bank. This would have cleaned up the balance through capital reduction. Subsequently, the bank was looking to increase its capital by way of a rights issue.
Both the Bahrain banks had made their money mainly by investing cash for wealthy Gulf clients in Western markets. Both banks saw earnings soar during the bull run of the 1990s.
But things turned sour around the turn of the millennium, when the US and European securities markets nosedived. Both banks lost money on holdings of US and European securities, particularly corporate bonds.
Even investments in successful companies went wrong as liquidity dried up. BIB and BMB were significant private equity investors in a number of solid US firms, but weak stock markets meant they could not easily exit those investments. Both defaulted on loans to Western banks in 2002.
As things stand now, BMB is still effectively in default on a $75 million credit facility with a group of international banks, and analysts say at least one of the creditors has voiced concerns about the viability of BMB continuing as a going concern.
It is understood BMB shareholders were considering winding up by pressing for an asset realisation protocol, similar to that agreed for BIB in May.
Meanwhile, GCC countries say they have already taken adequate steps to deal with the impact of the global financial crisis.
But the turmoil had given new urgency to their plan for monetary union.
Finance ministers and central bank governors of the GCC held an emergency meeting to discuss coordination of their response to the global downturn that threatens to derail their region's six-year economic boom.
The states, preparing for a single currency by 2010, say the crisis proves how much they need a single currency and that a single central bank should be a supervisory body.
The UAE says the financial crisis could accelerate an ambitious GCC plan to create the region's first monetary union.
Central Bank Governor Sultan bin Nasser Al Suwaidi says the UAE is still pushing to host the Gulf central bank, which will be the nucleus of the landmark monetary union.
"The planned GCC monetary union is something and the global financial crisis is something else," he said, when asked whether that crisis would delay the launching of the GCC monetary union, scheduled for 2010.
"Actually, this crisis could speed up the establishment of the GCC monetary union, not delay it. We have made substantial progress in this project and I believe there is determination to push ahead with it."
Analysts however note that the project could get held back further as the Gulf deals with a likely slowdown in regional infrastructure projects and lower real growth as the Organisation of the Petroleum Exporting Countries (Opec) cuts crude oil output.
The retreat of the US and European economy will have a negative affect on the balance of payments in GCC countries.
Investor confidence in the region has already taken a hit. Saudi Arabia's bourse plunged more than 44 per cent this year.
Sovereign wealth funds, meanwhile, have invested oil wealth around the world, including some high-profile buys in US equities.
In these circumstances GCC governments are figuring out how to strengthen the role of government in the financial sector, reassess Gulf foreign investment policies and look into ways to ensure the stability of the global oil market.
