Sunday, October 12, 2008

UAE guarantees bank deposits, interbank lending

Bloomberg:
Oct. 12 (Bloomberg) -- The United Arab Emirates guaranteed all deposits with local banks, including the country's two- largest lenders Emirates NBD and National Bank of Abu Dhabi, to ensure that credit continues to flow.

The measure, which also includes a guarantee of all inter- bank lending in the U.A.E., is designed to ``ensure continuity of economic growth and protect the national economy,'' state- owned Emirates News Agency reported, citing Prime Minister Sheikh Mohammed bin Rashid Al-Maktoum.

Twenty four local and 28 foreign banks operate in the U.A.E., where record oil revenue has spurred an economic boom. The seizure of global credit markets in the past few weeks has crimped lending in the local interbank market as well, prompting the U.A.E. central bank to set up a 50 billion dirham ($13.6 billion) fund to boost liquidity last month.
...
About 77 percent of U.A.E. bank loans are backed by assets.

Arabs own 8 percent of the bank deposits while other nationals own 17 percent, the central bank said today. Lending by U.A.E. banks surged 49 percent in the year to June.


RTE:
Australia, New Zealand and the United Arab Emirates have said they will guarantee all the deposits in their banks.

Australia's Prime Minister Kevin Rudd said the guarantee would be for the next three years.

The government of New Zealand has offered a two-year guarantee.


More:

Dubai mortgage lenders in merger talks (October 5) - Financial Times
Two government-controlled mortgage lenders in Dubai are discussing a merger, a sign that political pressure and strained liquidity may spur the consolidation of the finance industry in the United Arab Emirates.

Tamweel is one of the companies embroiled in a widespread corruption probe....
Emirates 24|7 (October 13)
Amlak Finance and Tamweel plunged 9.73 and 9.8 per cent respectively. The latter pair have both plunged more than 60 per cent in 2008. "Domestically, we are waiting for the third quarter results to reassure investors that the UAE economy is in good shape, particularly in the banking sector," said Khalek. Other analysts believe these will have little effect and predict the market slide may continue amid sustained overselling.
...
Both UAE markets are expected to make further declines today, although the UAE Central Bank's decision to guarantee all bank deposits is likely to lighten the mood.

However, in the current hysterical atmosphere, this could yet be seen as a negative development because it implies that bank deposits were indeed at risk prior to this announcement.

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