Islamic banks join in the race for Africa

CHINA is not the only financial powerhouse with its hungry eye on Africa. Flush with oil wealth, the Gulf states, too, are spying profitable opportunities among the hundreds of millions of Muslims who live just a hop across the Red Sea. Africa's economies are growing fast, thanks in large part to the commodities boom. Although many people on the continent do not have a bank account, the banking systems in some countries are growing increasingly sophisticated. Bankers from the Gulf hope that the middle class, particularly in the Muslim north, will turn to Islamic finance, and that firms will raise money through Islamic bonds, known as sukuk. Moody's, a credit-rating agency, reckons that although Islamic finance was worth a puny $18 billion at the end of last year, its potential is close to $235 billion?about half what it estimates as the GDP of Africa's Muslim population.

So far, forays from the Gulf into Africa have been limited to a few countries. Sudan?where only sharia-compliant finance is allowed in the north?dominates, holding over half of Africa's Islamic-banking assets. A number of Gulf banks, familiar with the country's language and oil resources, have joined forces with Sudanese investors to open Islamic banks. Last year the first sukuk from Africa was issued by a Sudanese cement firm. Reportedly, the government also tapped the market in January?selling bonds to Gulf investors to sidestep American economic sanctions over the massacres in Darfur. ...

The West's financial centres run red

THE axe is now swinging with abandon. UBS unveiled yet another set of embarrassing quarterly results on May 6th and also announced 5,500 job losses, many of them at its investment-banking unit. The cull comes soon after similar carnage at Citigroup and Merrill Lynch, which also announced thousands of cuts last month.

That these three are issuing pink slips is no surprise: they have posted the biggest losses, and UBS, for one, has said it wants to scale back its investment-banking business. But others are also cutting. On May 5th Morgan Stanley said it planned to chop 1,500 jobs in the next few months. JPMorgan Chase and Royal Bank of Scotland are set to shed jobs at Bear Stearns and ABN AMRO's wholesale arm respectively. ...

How would Europe cope if a big bank collapsed in its midst?

WHEN Northern Rock ran into disaster last September, it was not only panicky British depositors who queued up to withdraw their savings from the stricken mortgage lender. In Dublin hundreds of Irish depositors did too. They were soothed only when Alistair Darling, Britain's chancellor of the exchequer, told them that in the case of Northern Rock, the deposit-insurance scheme applied on both sides of the border.

In the European Union (EU), the implications of that bank run have given a new urgency to efforts to harmonise the system of deposit insurance. EU banks have an automatic ?passport? to operate branches in other member states. But there is so little clarity about how foreign depositors would be treated in the event of a bank failure that regulators fear a cross-border panic could easily erupt. ...