The report said the Saudi banks remained adequately capitalized throughout the crisis period.

"The banking loan portfolio is well diversified with respect to the private sector with loans to the commerce sector accounting to around 24 percent of total loans while manufacturing and processing sector contributes to around 10 percent of banks' loan portfolio as of March-10. However, miscellaneous loans which correspond in large part to personal loans and loans to high net worth individuals and lending to equities constitute around 40 percent of Saudi banks' loan portfolios," it said.

"This high concentration might expose banks to credit risk. In contrary to other GCC countries, loans to the real estate and construction sector contribute to a marginal portion of total banking loans with a percentage contribution of 6.5 percent. The prudent regulations implemented by SAMA before and during the financial crisis have protected the banking system to a large extent from the repercussions of the financial and credit turmoil and helped Saudi banks to emerge more resilient from the global financial crisis," the report said.

Overall, it said, the GCC banking system has shown to a large extent resilience to the financial crisis helped by the liquidity and prudential measures introduced by the monetary authorities which contributed in mitigating the adverse impact of the financial and credit turmoil on the banking system.

However, it warned, the banking systems had few vulnerabilities that were revealed by the financial turmoil and the adverse impact it had on the economies of the GCC countries. "Among those are high exposure to the real estate and construction sectors and stock markets along with increased reliance on external financing and capital inflows especially in the UAE. Banks in the GCC region will continue to make profits despite higher provisioning and slowdown in credit growth along with the deterioration in the quality of loan portfolios," it added. 

"The high exposure of the Bahrain's banking sector to the real estate and construction sectors makes banks vulnerable to credit risks triggered by the slump in property market and tight credit conditions faced by developers," the report said.

It said the banking sector in Bahrain had been adversely affected by the financial crisis and that was evident in the sharp drop in 2009 profitability with the net profit of commercial banks shedding 35 percent to $362 million.

"The main reason behind this decline was the elevation in Limited Liability Partnership (LLP) and impairment of investments which amounted to $330 million and $362 million in 2008 and 2009, respectively," it said.

"The retail banking portfolio in Bahrain is highly exposed to real estate and construction sector and households which together constitute around 56 percent of banks' loan portfolio (around 28 percent of total loans for each segment as of May-2010). The risk of default on personal lending which are mainly secured by salaries is believed to be minimal and manageable," it added.

In Kuwait, the banking sector is expected to continue to face challenges in the medium term. Rising NPLs and large concentration in banks' loan portfolio -- particularly in real estate, stressed non-bank financial institutions and equities -- are a major source of credit and financial risk.

Nevertheless, it said, the Kuwaiti banking sector is well capitalized and highly liquid, which should help the financial system to remain stable.

In the UAE, the banking sector's capitalization remains sound and is sufficient to absorb the debt problems faced by Dubai Government Related Entities (GRE).

Qatar's banking sector is mostly concentrated in the consumption, real estate and construction and public sectors which together constitute around 71 percent of Qatari banks' loan portfolio.

The banking system in Oman has exhibited strong resilience to the global financial crisis helped by the prudential measures introduced by monetary authorities which boosted liquidity with banks and strengthened their capital base.