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They stressed the importance of preventing a wider escalation of the conflict, which threatens to further endanger peace and stability in the region
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Banks Borrow Dh3.7b from Central Bank’s Swap Funds
DUBAI — The Central Bank of the United Arab Emirates (UAE) has provided Dh3.7 billion or $1.01 billion to local banks through its dollar/dirham swap facility, helping to bring down interbank interest rates.
The central bank wants to encourage lenders to use its swap and discount facilities to reduce the lending rates and stimulate the economy, it said in a statement on Wednesday.
One-month Emirates Interbank Offered Rate (EBOR) rates in the UAE have declined to 3.93 per cent from the last year’s high of 4.71 per cent while three-month rate closed 4.05 per cent on Wednesday.
Banking experts clarified that the decline in EBOR rates was indicative of the enhanced availability of liquidity in the economy.
But more studies would be required to assess the levels of decline in the EBOR rates, they added.
The central bank last month said it would supply dirham to the banking system with a guarantee to buy them back at a pre-arranged exchange rate at a later date, easing a liquidity crunch in the Emirate where banking sector is facing liquidity problem. The facility is available for periods from one week to 12 months, according to the central bank.
All banks operating in the UAE, “regardless of whether or not they have a shortfall in their dirham net position,” may use the facility, the central
bank offered in December last year.
The central bank buys dollars against the spot dirham and sells dollars against the forward dirham at the same time.
The bank lending in the UAE most likely slowed in the last quarter as the worst global financial crisis hit the largest economies of the world.
The UAE in October 2008 announced plans to pump Dh70 billion into the banking industry, set up a $13.6 billion credit facility and guaranteed deposits of all local banks and some foreign lenders.
The central bank and finance ministry have together launched Dh120 billion of emergency funding since September to help banks cope with tight credit conditions during the global financial crisis.
Central Bank Governor Sultan
Nasser Al Suwaidi said last month he expected credit growth in the UAE would slow to no more than 10 per
cent this year — after surging more
than 50 per cent in the year to June 2008.
The UAE central bank has kept its benchmark repo rate steady at 1.5 per cent since October 8, not matching cuts made by the US Federal Reserve on the last two occasions.
The dirham is pegged to the US dollar and cuts in US interest rates are usually matched by the UAE.
· abdulbasit@khaleejtimes.com
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