Text size:

  • Small
  • Normal
  • Large
The UAE Central Bank launched its fund today in a bid to ease market liquidity.
Ryan Carter Staff
The UAE Central Bank launched its fund today in a bid to ease market liquidity.

Central Bank action fails to stave off crisis

The UAE liquidity squeeze shows no signs of loosening, despite emergency measures.

The UAE liquidity squeeze shows no signs of loosening, despite the central bank today unveiling emergency measures to inject billions of dirhams into the system. Late last night, the central bank sent a short note to all banks in the UAE, stating how its Dh50 billion emergency lending facility, announced on Monday, would ease tightness in the local money market. No specifics were given.

This morning, however, the intended effect of the emergency facility ? to combat high lending rates between banks ? was not achieved. The UAE interbank offer rate (EIBOR) rose to 3.7625 per cent this morning, up from 3.66 per cent on Wednesday and nearly double the previous month. Inter bank lending rates have risen across the region, as financial turmoil in the West forced international financial institutions to withdraw their cash. The shortage of money has created fears that UAE banks would be unable to continue normal operations, and that funding for essential property and infrastructure projects could dry up.

According to the note sent to local banks last night, the central bank will lend local banks an amount equivalent to their reserve requirement, while charging them 3 per cent interest above the current central bank repo rate, which stands at 2 per cent today. Banks can also choose to borrow more than the amount of their reserve requirement, but will be charged extra: the repo rate plus 5 per cent interest.

"It's not clear whether what they have sent defines the entire mechanism by which the Dh50 billion is going to be used by the banks," said Ahmed El Shall, chief financial officer of Dubai Bank. "The rest of the mechanism by which the facility could be used, such as a discount window or some other open market operation, has not be detailed yet." "No one knows" whether more details are yet to come, he said. tpantin@thenational.ae

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 Three generations of the Hakimi family tend to their stall Crawford Market in Mumbai. Subhash Sharma for The National

In pictures: Shopper’s delight at Crawford Market in Mumbai

Crawford Market is an old British-style covered market dealing in just about every kind of fresh food and domestic animal imaginable. Later on renamed Mahatma Jotirao Phule, the market remains popular among locals and visitors by its old name, taken from Arthur Crawford who was the first municipal commissioner of the city.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National