The United Arab Emirates may have to do more to support its banks and prevent the woes of a leading Dubai-owned conglomerate from causing losses and derailing a tentative economic recovery, according to bankers and analysts.

The decision by Dubai World, a flagship government holding company of developers, ports operators and investment companies, to restructure $26bn of its debts has shocked markets and rattled regional and international financial institutions, which had expected government support.

Standard & Poor's, the rating agency, yesterday downgraded a clutch of leading Dubai banks owing to their exposure to the troubled state-owned conglomerate, and warned further demotions could come soon. Fitch Ratings also put four banks on review for a downgrade yesterday, including HSBC Middle East.