• Home
• /
• Local business

Sufficient Liquid Assets Can Prevent Financial Crisis

“Here I do not mean “AAA” rated papers…I mean, we have to look at the type of securities that would fit the category of liquid assets at times of crisis and what percentages of these securities would be suitable for banks to hold,” the governor said while sharing his experiences with participants at an international conference of regulators and financial experts. The officials were in the capital to discuss policy responses to the financial crisis.

The two-day conference for regulators from the Arab world, which opened yesterday, is jointly organised by the Arab Monetary Fund and the Financial Stability Institute. Al Suwaidi said that inter-bank deposits, medium term notes programmes, euro-commercial papers and similar instruments issued by UAE banks in international capital markets acted as a double-edged sword during the crisis.

“We have to look at the liabilities percentage of these instruments, and how they match with first class liquid securities held by our banks,” he said.

In order to make the financial system leak-proof, Al Suwaidi urged Arab regulators to examine the nature of businesses or assets banks are acquiring or selling to their customers. “The question is do they (banks) understands the risk, and have explained the inherent risks sufficiently to their customers?” he said.

The growth of loans and advances per economic sector in relation to percentage of cross-border loans is an important indicator that needs to be monitored, Al Suwaidi told the conference.

· haseebhaider@khaleejtimes.com