Banks are sound, says UAE

Dubai, Nov. 29: The central bank of the United Arab Emirates said on Sun-day the oil-rich country’s banking sector is more so-und and liquid than a year ago, days after Dubai asked to suspend debt payments.  “The UAE banking system is more sound and liquid than a year ago,” the central bank said in a statement, pointing out that the UAE banks have made fewer short-term borrowings from international lenders, with foreign interbank deposits and short-term bonds dropping by 25 per cent.

The Central Bank also set up an emergency facility on Sunday to support bank liquidity in the first policy response to Dubai’s debt woes that threatened to paralyse lending and derail economic recovery. “It might support the market a little bit but I don’t think it is enough,” said Mr Shawkut Raslan, head of brokerage at Prime Emirates brokerage.

“I think some foreigners will take their money out of the country and others will be afraid to put their money into these markets.” The Central Bank policy move came late on Sunday as Dubai’s Supreme Fiscal Committee gathered to prepare a statement before the market open on Monday in an attempt to reassure investors.  The Central Bank said it opened a “special additional liquidity facility linked to their current accounts” at 50 basis points over the three month Emirates interbank offered rate (EIBOR), but offered no further details.

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