The War of Banks

The War of Banks

The "legitimate" government in Aden is suffering from its inability to control local resources, and the Sana'a government is suffering from its inability to provide liquidity to the larger market that it manages de facto.

The trade balance is fundamentally unbalanced, and "unbalanced" is not a word that actually reflects the situation. The country's inability to receive external financial resources due to the war, and donors have significantly reduced their funding, perhaps exceeding 80% of what it was in 2022. Even the main donor, the coalition, has withdrawn very significantly from mid-2023 to the present, and the second source, remittances from expatriates, which represent the main source of foreign currency today, as we know, exports are negligible compared to it, what do they represent?

At the same time, the collapse of the exchange rate of the currency against foreign currencies may reach or exceed the level of 2000-2500 per dollar, while the exchange rate in Sana'a cannot represent a fair price as it does not match the parallel inflation in the commodity market "the price is exorbitant", which may represent twice the prices in Aden...

And as I pointed out, in contrast, the monetary system in Sana'a is suffering from a sharp decline in the liquidity available to the market in foreign or local currency, which means a respectable formation on the back of the citizen (stagflation).

All of this makes the government in an effort to find fair cash flows between the entire republic, so taxes do not stop from the Sana'a government... and they will not stop, as resources are shrinking...

In the other equation for the "legitimate" government, and through the management of the Central Bank in Aden, it has launched its new battle, which we can call (the war of banks), supported by the Aden government's declaration that the Houthi group is a "terrorist group", in order to pressure the Sana'a government to accept the economic settlement related to the bank, and because the management of the Central Bank in Aden does not have tools to pressure except the large banks that include most of the dealers in the republic, it launched its war on them, starting in April at the request of transferring the management of banks (6 banks specifically) to Aden within 60 days, knowing the difficulty of that "why?"

Because the Central Bank itself was unable to transfer its infrastructure, which the bank still holds in Sana'a, meaning that the Central Bank is administratively in Aden, technically in Sana'a.. #Hable_Time

Although I expect that the decision is not from the decision-makers within the management of the Central Bank, but from outside it, but in general, the battle seems biased against the largest banks in Yemen and did not offer any alternative to the citizen dealing with those banks, where and as the reference to "fighting money laundering" means the data and information that banks provide to the Central Bank, but in depth we will find the new banks that have been generated during the past three years, still have the same problem in their governance and their ability to provide effective, alternative and accountable banking services, and I think that the risks of money laundering may affect them more at any moment, which makes the alternative for the citizen again the cashier or the home safe, so the decision, although it is based on pressure on the Sana'a government, its basic harm is on the citizen who has no alternative but to work outside the banking and banking system, and the continued zeroing of the ability of banks and the central bank to control monetary resources in the first place.

Among the banks referred to is Bank Al Amal, which is the only company in Yemen that can be considered a non-profit company, based on a special law 23 of 2002, this part may be in its favor or against it, and this may take it out of the circle of other profitable banks referred to in the decision.

The decision indicated to:

Failure of banks to comply with the law! The decision did not refer to any law,

And the decision of the Central Bank, which is understood from it, is to transfer its management "This is a form of impossibility, and the alternative was for those banks to have independent regional administrations in the liberated areas, and this is possible."

And non-compliance with the requirements of money laundering and terrorist financing and its continued dealings with a group classified as terrorist, this phrase makes more than 20 banks and hundreds of money changers on the list that can be classified with the same classification, not just 6 banks, which means that the decision itself can be rephrased for a number of other banks at any time, and also means that the decision is biased against the six banks only, and means basically (the war on the referred banks only) There are some matters that we expect clarification on primarily from the Central Bank of Aden administration:

What if the banks thought about requesting a group of legal specialists in the public prosecution and administrative court departments in the capital Aden to review these decisions in order to push for filing a complaint against the Central Bank of Aden administration for this bias that may be a subject of legal dispute between the banks and the Central Bank in Aden, and it may even be a subject of dispute with international stakeholders in monitoring banks in Yemen such as the International Monetary Fund.

It cannot be said that the move to find a unified leadership for monetary and financial policy in the country is not a main concern for the Central Bank in order to manage the resources that the government is unable to provide, and therefore unification of work will be a basic requirement. It should be understood that unification of the currency does not mean that it will decline, but rather that it will stabilize at a close and fair figure in the exchange market. However, the resources that the banks manage in the first place may not exceed 5% of the money supply, which depends on the human mass consuming the currency. If we estimate that the consumer mass in Yemen is 3 billion Yemeni riyals daily, then the largest mass is managed in an economy not controlled by the Central Bank or the banks, but rather in the hidden markets and to personal home safes, offices, money changers, which is more than 95% of the daily money supply. And this mass is 65% controlled by Sana'a areas in line with the human mass there, meaning that 1.2 billion is consumed daily in the liberated governorates, so in the scope of Sana'a government governorates, 1.8 billion. Withdrawing the banks will not affect the increase in the capacity of the Central Bank in the first place or the banks in Aden, but does this lead to the unification of the currency? I do not think so without a political decision.

The circular issued on 30/5/2024 regarding the old currency before 2016 concerns the liberated areas, and basically the availability of the old currency in the liberated areas is almost over since 2018, as the new currency has been replaced in all its corners, and in some way the "legitimate" government has contributed to this matter, instead of controlling the old currency and detaining it at the time, and nothing can be understood from this move now except that the cancellation of the old currency is coming soon, and if it is done within 60 days, the currency will be practically worthless, but it will remain mobile within the Sana'a government and even if it is not adopted in others, this situation contributes to people's fears of not keeping the old currency and it is actually damaged and the Central Bank administration in Sana'a does not have the ability to print alternative paper currency, and if it resorted to it, the customers available to the public will be within Sana'a (metal coins) and it requires "carrying socks of cash" in which we carry coins of different denominations, and , so where should the citizen in Sana'a present that currency and obtain a replacement for it? There is no place, so what is the benefit of the circular if the Central Bank in Aden does not have a mechanism to drain the currency from Sana'a and withdraw and cancel it ..... So the decision without managing it will represent a manufacture of anxiety and tension from the citizens towards the banking and banking systems more, meaning more erosion of banks and the banking system in general, not specific.

Another part of the problem with controlling cash in Aden is the problem of controlling banking in the liberated areas, which can be said that a number of those banks may be central banks on their own. This calls for fear that the Central Bank in Aden will move to find internal alternatives that may make it issue other decisions against banks and banks in the liberated areas to control the cash they have. So how can the citizen secure his position in the light of this unclear situation?

The other problem is that the international bodies concerned with banks and banking only recognize the legitimate government in the media, but in fact they do not recognize either Aden or Sana'a, but rather the United Nations mandate over Yemen as an international authority or international mandate due to Yemen's situation to this day under Chapter VII, meaning that all decisions issued by the Central Bank of Aden administration are taken into account "in a manner that is consistent with the interests that do not affect the interventions of international donor organizations and under the heading of protecting civilians." Therefore, they may be bypassed when the need arises.

In other words: Those who have the tools do not care about the decisions!

Let me summarize this quick intervention:

There is an unhealthy political situation. The Central Bank of Yemen is divided between two administrations, one in Sana'a and the other in Aden. This reflects the country's troubled political situation. One of the main failures that occurred is that the Aden administration, at the height of the transfer, made basic promises to the relevant international parties in exchange for approval of the transfer, and unfortunately failed to fulfill them. If it had started them or started them on time, the situation would have been completely different. The actual solution today is to study the Libyan model, in which the Yemeni story was repeated, with the bank's management divided between east and west, with the difference in Libya's economic strength. A law was issued that is the basic version of the law prohibiting usury transactions, which (quoted) the law in Sana'a, and two currencies, east and west, and the law was canceled at the beginning of the unification of financial and monetary policies and the two currencies were unified, which began through an expired coordination committee with a unified management.

Opening an effective and efficient dialogue with the Central Bank management in Aden and Sana'a. There is always an opportunity for logical negotiation to reach compromises that satisfy all parties and protect the interests of citizens.

The decisions are based on the laws in force in Yemen and grant the Central Bank broad powers to regulate and supervise the work of banks. However, there is a very real possibility of legal loopholes that could be exploited by affected banks to challenge these decisions before the courts and the Public Prosecution in Yemen by forming an alliance between them against the Central Bank management. For example, these decisions affect the rights of citizens dealing with them and expose their interests to danger, and may not be issued in accordance with the correct legal procedures, and there is a clear bias against the six banks in the presence of banks if the relevant regulatory bodies are activated in a neutral manner by the government, "Banks, banks and banking" that violate the aforementioned laws will appear. Therefore, it may be necessary to form two specialized legal teams to study the situation in Sana'a and Aden, and they can deal with what is imposed by the Central Bank management in Sana'a and the Central Bank management in Aden, which seems to be aimed at destroying those banks or taking them out of competition.

The decisions affect relations with international banks and financial institutions. Therefore, a joint mechanism must be established for communication between those banks and relevant international bodies to obtain their support and advice on how to deal with the situation.

I am not here for or against the Central Bank management, I am only here to understand and look at the primary interest, which is the interest of the citizen first, and we do not care about this political nonsense that destroys the remaining life of the livelihood of Yemenis, for the sake of differences that can be solved by the neutrality of the banking sector in the struggle for the higher interest of the homeland before the state. The homeland with its citizens, not with its political components or the forces fighting for power, which I repeat no one looks at positively and Yemen is not among the lists of international interests but is among the lists of regional interests.

Thank you

 Ahmed Mubarak Basheer 

31/05/2024