Just when private bankers might have thought that the worst of the financial turmoil has passed, the recent debt drama in Dubai is a timely reminder that problems remain.

Just when private bankers might have thought that the worst of the financial turmoil has passed, the recent debt drama in Dubai is a timely reminder that problems remain. I consider that to be a good development in the long run if it squashes any risk of complacency.

Dubai World, the state-run organisation in the Gulf city-state, is seeking for a delay in repaying its $59 billion debt pile. That organisation carries the lion’s share of the debt burden of Dubai, a jurisdiction that has seen rapid growth in recent years and which has become an important hub for wealth management.

And although there are specific circumstances affecting Dubai, there is no doubt that the sight of a Middle East jurisdiction suddenly calling for a repayment holiday will fuel worries that governments may try to repudiate sovereign debt, either by delays to repayments or, more likely, by the sly old ploy of inflating a currency. Rating agencies have already warned about the outlook for UK government debt, for example – which is hardly surprising given the multi-billion-pound sums being spent on bailing out lenders such as Royal Bank of Scotland and Lloyds Banking Group. Even the mighty US cannot rule out the risk that its AAA-status as a sovereign borrower might be cut by at least a notch.

Should the Dubai issue be a worry to the private banks and wealth managers that have spent money setting up teams in the region? In the short run, there is bound to be some slackening of hiring or even cancellations; decisions to expand or build new teams could be be put on ice until a clear situation emerges. It is also likely that investors in certain sectors, such as real estate and debt, will remain very cautious. And in the growing area of modern Shariah finance known as sukuk – a form of debt issuance that is meant to comply with Islamic law – the drama could squeeze activity.

As far as bankers and headhunters are concerned, they may be wary about Dubai for a while, but there is no reason for panic. There has certainly been plenty of hiring and movement activity among private banks in the Gulf in recent months, although at a somewhat slacker pace than in the past two to three years. And Gulf-based banks, such as Emirates NBD, remain heavy-hitters.

Dubai and its neighbouring states continue to keep us financial journalists busy as far as bankers’ moves are concerned. Barclays Wealth and Société Générale have both made hires in the region in recent weeks, for example.

And although markets fell last week when the Dubai debt stories broke, not everyone is alarmed. Some investors, such as Chris De Pury, partner at property investment firm Berwin Leighton Paisner, are choosing to stay relatively sanguine: “The effects will not be as bad now that the banks have rebuilt their balance sheets, and we should be extremely grateful that this did not happen last year when it may have been the news that would have pushed things over the edge.”

Let us hope he is correct. Some of the details that have emerged this week are certainly cause for concern. According to one report by Bloomberg on Friday, citing JP Morgan, Royal Bank of Scotland Group was the biggest underwriter of loans to Dubai World, while HSBC has the most at risk in the United Arab Emirates.

Dubai’s debt troubles may prove to be a blessing in disguise if they remind people that debt burdens have not disappeared; rather, those problems have been largely pushed back by governments’ resort to the age-old use of the printing press. Recovering from the excesses of cheap global credit is going to take a long time. If this saga reminds people of the need for prudent risk-taking and avoidance of heavy debt, this saga will have a silver lining.