Yemen’s Banking Sector in Crisis as Houthi Authorities Clamp Down

Sana’a, Yemen - The Houthi authorities in Sana’a have intensified measures to punish commercial banks intending to relocate their headquarters to Aden or those caught implementing financial transactions under the Aden-based central bank’s import financing mechanism. This move has sent shockwaves through the country’s financial sector, causing fears and shaking confidence among banking sector stakeholders.

Measures to Punish Banks

Houthi security personnel have raided several major banks in Sana’a, arresting executives and freezing assets. According to sources, these measures are aimed at punishing banks that have interacted with the central bank in Aden, particularly those that have opened letters of credit or refused to sell foreign currency to import basic commodities.

Dispute over Cooperative and Agricultural Credit Bank (CAC)

The Sana’a Center has learned that a dispute between authorities in Sana’a and Aden over the CAC led to central bank officials in Aden successfully petitioning SWIFT to suspend Yemen’s connection to the global banking network.

Complications Arising from Conflict

The Saudi-led military coalition’s restrictions on transferring surplus foreign currency from Yemeni banks have left them unable to finance imports and meet the population’s needs. Meanwhile, the use of smugglers to move cash across borders has become a lucrative business, but at high risks and costs.

Challenges Facing Yemen’s Banking Sector

Experts warn that the lack of a unified central bank authority is the most serious challenge facing Yemen’s commercial and Islamic banks. The international community must pressure all parties to the conflict to facilitate a reunified administration for the Central Bank of Yemen (CBY), which is currently divided between Houthi-controlled Sana’a and the internationally recognized Yemeni government’s temporary capital of Aden.

Recommendations

To revitalize Yemen’s banking sector, it is recommended that:

• Reunification of the Central Bank of Yemen takes place
• Anti-money laundering and counterterrorism financing mechanisms are reactivated
• A single, unified authority to regulate the financial sector nationwide is established
• International support and sanctions against any party that attempts to impede the central bank’s reunification are strengthened

Conclusion

The crisis in Yemen’s banking sector highlights the urgent need for a political solution to end the conflict and restore stability to the country. Until then, it is essential that all parties work together to find a solution that prioritizes the well-being of the Yemeni people.