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UAE looks to bridge $30bn loan-deposit gap

Dubai, March 9, 2009

Loans at United Arab Emirates' banks exceeded customer deposits by Dh110 billion ($29.95 billion) and the government was looking for a way to bridge the gap, the UAE central bank's governor said on Monday.

'The current situation requires a stimulus plan for banks and the economy in view of this 'gap' which could be bridged in collaboration with the Ministry of Finance,' said Sultan Nasser Al-Suweidi, according to state news agency WAM.

He gave no further details of a plan he first mentioned at a bankers' meeting last month.

The finance ministry of the second-largest Arab economy said last year it would invest Dh70 billion into long-term deposits at banks struggling to cope with tight global credit conditions.

The sector has been hit by a real estate downturn in Dubai, where residential property prices have fallen on average by 25 per cent since peaking last year, Morgan Stanley said last month.

Emirates NBD said last week it would convert some of those federal deposits into Tier 2 capital to bolster its capital base.

Six other banks, including Commercial Bank of Dubai, would seek shareholders' approval to do the same, daily Al-Khaleej reported on Monday.

The UAE's economic stimulus package - which Suweidi said accounted for 6.9 per cent of the oil exporter's gross domestic product - also includes a Dh50 billion central bank funding facility for banks.

Dubai's government has sold $10 billion in bonds to the UAE central bank to help state-linked companies meet their financial commitments.

Suweidi said last month the central bank and finance ministry were working on finding a way to reduce interest rates charged by banks on corporate deposits, which have been rising in recent months.-Reuters




Tags: UAE | gap | loan-deposit |

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