DUBAI/ABU DHABI: The United Arab Emirates yesterday approved a series of internal preventive steps and measures to protect the economy, promising to protect banks from credit risks and guarantee bank deposits, state news agency WAM said. The government also agreed it would pump sufficient liquidity into the system if needed and facilitate inter-bank lending, WAM said.
President Sheikh Khalifa Ibn Zayed Al-Nahyan confirmed that the UAE economy is strong and sound and that its banking system is solid and efficient following a briefing on the latest developments on the global financial crisis by Vice President and Prime Minister of UAE and Ruler of Dubai Sheikh Mohammed Ibn Rashid Al-Maktoum.Among the preventive measures taken by the Cabinet that is headed by Sheikh Mohammed, the federal government will ensure that no UAE national bank will be exposed to credit risks, guarantee deposits and savings in all national banks, guarantee all inter-bank lending operations between banks operating in the UAE and inject sufficient liquidity in the financial system if and when necessary.
“We are determined to protect our financial and banking system out of keenness to preserve the interests of our country and people,” Sheikh Mohammed affirmed at the end of the Cabinet session.
Officials said that country’s financial institutions remain healthy despite growing fears the global credit crisis will hurt the booming Gulf economy.
Emirates Central Bank Governor Sultan Bin Nasser Al-Suwaidi said that “national and foreign banks in the UAE enjoy a strong financial position,” according to a statement released to state news agency WAM. Most holdings in the UAE banks are located within the country rather than abroad, and “their parties are known and sound, contrary to what is there in other economies,” Al-Suwaidi added.
“Our national economy, banking sector and financial markets are sound. They draw their strength from a long-term vision, boosted by flexible legislation that protect(s) local and foreign capital,” Sheik Mohammed was quoted by WAM as saying. The government has taken steps to shore up the economy and ease local credit markets.
In late September, the central bank created a 50 billion dirham ($13.61 billion) lending facility to provide liquidity to local banks.
Then last week, the Central Bank slashed the lending rate on the facility to 3 percent from 5 percent. It also cut the interest rate by which banks lend to banks by half a percentage point, in line with moves by the US Federal Reserve.
