Shareholders approve the capital injection from the Ministry of Finance arranged last year.
Dubai Islamic Bank to get $1bn injection
Dubai Islamic Bank (DIB) shareholders have approved a Dh3.75 billion (US$1.02bn) capital injection from the Ministry of Finance arranged last year as part of the Government's efforts to shore up the banking system. The funds, structured as a Sharia-compliant wakala agreement, follows a Dh70bn Ministry of Finance stability programme put in place in October 2008 to help restart lending at banks. Local banks last year received billions of dirhams of deposits from the ministry that many later converted into capital. Banks also tapped into a Dh50bn lending facility set up by the Central Bank in response to the global financial crisis.
"The ministry has granted to the bank the wakala capital in the amount of Dh3.75bn for the purpose of providing Sharia-compliant financing or products and to stimulate the economic activity in the UAE and in general to invest the wakala capital pursuant to the terms and conditions of the … agreement," the shareholders' resolution said. Shareholders approved the deposits, agreed to by the bank's board of directors last December, at a meeting in Deira.
The wakala capital will count as Tier 2 capital on the bank's balance sheet. Tier 2 capital factors into measures of banks' financial stability but is considered less stable than Tier 1 capital. The bank did not provide further details on the terms of the wakala agreement, apart from saying that under some circumstances the ministry could convert the money into equity, giving it a shareholding in the Dubai-listed bank.
The bank's shares closed 0.9 per cent higher at Dh2.24. email@example.com