UAE central bank says to back banking sector

08:11, November 30, 2009      

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The Central Bank of the United Arab Emirates (UAE) said Sunday that it stands behind its banks and branches of foreign banks operating in the Gulf Arab country, the official WAM news agency reported.

The central bank provided the banks with a special additional liquidity linked to their current accounts at the central bank, at the rate of 50 basis points above the three months Emirates Interbank Offered Rate, the interest rate charged by banks in the country for interbank transactions, the report said.

The central bank said the UAE's banking system is more sound and liquid than a year ago, adding that the UAE banks have made fewer short-term borrowings from international lenders with foreign interbank deposits and short-term bonds down by 25 percent.

According to the report, the country's banking system is comprised of retail commercial banks only, with a strong base of stable deposits, which it said is the best banking model set that weathered the current global financial crisis.

From the consolidated balance-sheet of banks, interbank deposits of the UAE's banking system constitute 10.3 percent of the liabilities, with foreign interbank deposits accounting for 5 percent only, the report said.

A senior government official said Saturday that Abu Dhabi will "pick and choose" how to assist debt-laden Dubai, according to local media reports.

On Saturday, a spokesman for the UAE Central Bank said the bank is "closely watching" events stemming from the Dubai debt crisis to ensure no harm results for the national economy.

Further news would be available until the central bank opens Monday, when stock markets in Dubai and Abu Dhabi also reopen following an extended break for Eid al-Adha, a religious holiday observed across the Muslim countries, the spokesman said.

The government of Dubai, a member of the oil-rich federation UAE, announced Wednesday that it would ask creditors of Dubai World, one of its largest and most important conglomerates, to agree to a debt moratorium of at least six months as a first step towards restructuring.

The announcement, described by ratings agency Standard and Poor's as a default, provided the focus for world financial markets Thursday, hitting bank stocks and the price of oil, but lifting the dollar on a day when U.S. and most Gulf markets were closed.

Source: Xinhua
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