Most studies of crisis management and business failure are based on research in western economic situations and assume western institutional patterns and attitudes. These assume that certain fundamental elements of financial rationality guide the intervention of banks and financial institutions in situations of incipient business failure. This study is based on an empirical analysis of companies in the GCC region of companies which are clients of banks which operate within the frameworks of the Islamic Banking System in the Arab Middle East. A “sharp‐bending” orientation rather than a “business failure” model is used and conclusions are reached about the role of the banks and other financial institutions and their methods of managing difficult client situations. Some typical situations relating to problem loans, loan officers’ responses and behaviour and out comes are reviewed. The role of the bank in triggering early problem‐recognition is described and the response of the bank, subsequent actions and the sequence of recovery are described. Procedures and actions which would be regarded as “irrational” in a western cultural context are interpretable as “rational” within different cultural frameworks. We argue that there is no one universally‐accepted frame work of business rationality, and that “financial rationalities” are the product of deeply‐embedded cultural frames of reference.
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