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Yemen’s Rival Central Banks Fuel Economic Crisis with Retaliatory Bans on Financial Institutions
The ongoing economic war between Yemen’s rival central banks has escalated, putting immense pressure on the country’s fragile banking sector.
Escalation of the Conflict
The Sanaa-controlled central bank, backed by Houthi rebels, responded to the government-controlled central bank in Aden’s move to suspend business with six banks by imposing a ban on transactions with 13 local and international financial institutions. The Sanaa central bank accused these entities of sharing data with hostile states and violating anti-money laundering regulations.
Previous Development
Just a day before, the Aden-based central bank suspended dealings with six banks, citing similar reasons.
Impact on Yemen’s Banking Industry
This latest development is likely to exacerbate the economic woes of Yemen’s already battered banking industry, which has been struggling to cope with the effects of war, political instability, and international sanctions. The situation is further complicated by the lack of a unified financial regulatory framework in Yemen, allowing rival central banks to operate independently and making it challenging for banks to navigate the complex regulatory landscape.
Consequences
The retaliatory bans have sent shockwaves through the banking sector, causing uncertainty and disrupting financial transactions. Analysts warn that this move could have far-reaching consequences, including:
- Reduced access to essential services such as foreign exchange and credit
- Increased reliance on informal financial networks that often lack transparency and oversight
Outlook
As the standoff between Yemen’s rival central banks continues, the country’s banking industry is bracing for a prolonged period of instability, making it challenging for businesses and individuals to conduct transactions and access vital financial services. The situation underscores the urgent need for a unified approach to financial regulation in Yemen, as well as international support to help stabilize the country’s fragile economy.
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