For most of the past decade, the story of Gulf finance was a story of ambition. Sovereign funds set the pace, giga-projects absorbed the headlines, and every institution in the region was measured by the scale of what it was prepared to underwrite. That era has not ended, but its terms are changing. The abundance of capital that defined it is now colliding with a harder question: which of these commitments can actually be sustained through a full rate cycle.
I have spent the last eighteen months arguing, internally and with peers, that the next competitive advantage in this market is not access to capital. It is the discipline to leave some of it unspent. That is an unfamiliar posture for a region that has rewarded boldness, and it is not a popular one. But the institutions that treat their balance sheet as a strategic instrument rather than a growth engine will be the ones still standing when the cycle turns.
The cost of easy money has caught up
The repricing of risk since 2023 has been more consequential for the Gulf than most commentary acknowledges. When funding was cheap, the gap between a well-underwritten position and a speculative one was invisible on the income statement. That gap is now visible, and it compounds quarter over quarter. Institutions that grew their loan books fastest in the cheap-money years are discovering that growth and quality were not the same thing.
At Meridian we made a deliberate choice in 2024 to slow origination in two segments where we could not price risk with conviction. It cost us market share and it cost me some difficult board conversations. Eighteen months on, our non-performing ratio is roughly half the regional average, and we have the capacity to lend into the current dislocation while others are repairing. Discipline bought us optionality.
The next competitive advantage in this market is not access to capital. It is the discipline to leave some of it unspent.
Digital scale without deposit gravity is fragile
The region’s enthusiasm for digital banking has been correct in direction and often wrong in sequencing. A digital front end can acquire customers at remarkable speed, but acquisition is not the same as a durable deposit base. Several regional entrants have scaled user numbers impressively while remaining structurally dependent on wholesale funding. That is a comfortable model in a liquidity surplus and a dangerous one the moment liquidity tightens.
We built our digital proposition around primary banking relationships rather than headline sign-ups. It grew more slowly and the metrics were less flattering in the early quarters. But the deposits are sticky, the cost of funds is stable, and the franchise is defensible. In banking, the unglamorous variable is almost always the one that decides who survives.
In banking, the unglamorous variable is almost always the one that decides who survives.
What I am watching into 2027
Three things will define the regional picture over the next eighteen months. First, whether the giga-project financing that has been syndicated on optimistic assumptions can be refinanced on realistic ones. Second, whether Gulf regulators tighten capital requirements ahead of, or behind, the credit cycle. And third, whether the region’s family conglomerates professionalise their treasury functions fast enough to weather a genuine downturn.
None of this is a reason for pessimism. The Gulf enters this period with stronger fundamentals than any comparable emerging market. But strength is not the same as certainty, and the institutions that internalise that distinction now will be the ones setting the terms of the recovery. Ambition built this decade. Discipline will decide the next one.
