If the writedowns facing two Saudi banking groups had arisen in the United Arab Emirates, officials there would have sought a settlement that included all banks, UAE central bank governor Sultan Nasser al-Suweidi said.

Saudi family banking conglomerates Saad Group and Ahmad Hamad Algosaibi and Bros Co (Ahab) face legal battles in the US courts and the Gulf Arab region after defaulting on debts, with some bankers expecting the writedowns to affect 120 banks and cost $22 billion.

A Saudi government panel last month brokered a debt settlement deal between Saad Group and Saudi banks only, raising fears among international creditors they could be sidestepped.

'I can't comment on another country, on another sovereign.

But if the issue had been in the UAE we would call all banks, and we would put them in one conference room and tell them to come out with a solution and to share on an equal basis the assets which are available,' Suweidi said in an interview with Reuters on the sideline of the IMF/World Bank conference in Istanbul.

'We would do some kind of settlement that would be based on equal footing for all banks,' he added.

Suweidi echoed comments made last week by UAE's Federal National Council that there was no reason for alarm over the UAE banking sector's exposure.

Asked about the impact he said, 'I don't think it will be tremendous. I think we could put provisions, and we will write off loans as and when necessary.'

He earlier commented that 13 banks had exposure to the Saad and Algosaibi groups but did not give a sum. The Dubai and Abu Dhabi stock exchanges later made listed banks disclose the size of their exposure.

Speaking on the UAE banking sector Suweidi said the central bank was ready to guide and take care of bad loans on a case by case basis.

Suweidi declined to answer questions on whether the central bank would buy a second tranche of Dubai's $20 billion bond or whether there would be a first federal sovereign bond.

'We will of course when the time comes and the Federal government issues tradable bonds, we will take them and buy them and sell them and make a market in them to attract liquidity and absorb liquidity, an open market,' he said.

Last month the governor said the economy may shrink or grow slightly in 2009 in the wake of the economic crisis.

He declined to give a forecast for 2010 but said, 'We will have resolved a lot of the problems by mid-next year.'

'We are not worried about inflation. As long as growth is subdued, interest rates will be kept low.” – Reuters