The Government is to finalise legislation in the next two weeks to provide the legal framework for its promised guarantee on bank deposits.
Government to finalise banks deal
Abu Dhabi // The Government is to finalise legislation in the next two weeks to provide the legal framework for its promised guarantee on bank deposits. Obaid Humaid al Tayer, the Minister of State for Financial Affairs, told the Federal National Council (FNC) that the Government was committed to protecting the country's banks and was prepared to provide them with further investment if necessary.
The Government has introduced several protective measures since September to support the economy in the face of the international financial crisis. These include an emergency bank funding plan of Dh120 billion (US$32.67bn) and a guarantee on bank deposits. Members of the FNC complained that banks had not been provided with the details of the guarantee. "Before the banks are officially notified, legislation has to be formulated," said Mr al Tayer. He later told reporters the legislation would be finalised in two weeks, and that the "format" of the guarantee was still being discussed.
Mr al Tayer's assurances came as some banks slashed customers' credit limits. Standard Chartered has reduced the credit ceiling for some customers to Dh1,000 (US$272), while some HSBC clients found their credit limits cut by as much as 80 per cent in the past few days. "We're taking all the right steps that reflect on the liquidity in the market," Mr al Tayer told the FNC."We have offered an unlimited guarantee. The Government didn't put a limit to the amount of guarantee.
"Now, we are preparing the banking sector for upcoming growth. The total of the Government support to banks is Dh120bn, which is 14 per cent of the GDP, and we will inject more if needed," he said, adding that banks had already received Dh50bn. The Government was closely monitoring the financial market, he continued, and banks were required to file a report detailing their status every two weeks. "Banks should control their capital, facilitate lending for small and medium projects and develop strategic plans to face the credit slowdown," he added. Sultan al Suwaidi, Governor of the Central Bank, who was at the FNC meeting, said the government body was monitoring the impact of the international crisis on bank lending. He told reporters after his testimony that the Central Bank would not cut its interest rate if the US did so. There has been widespread speculation the US Federal Reserve will the target rate for overnight lending to near zero on Tuesday in a bid to restore growth. Also at yesterday's meeting, members of the FNC discussed the Government's labour policies. Saqr Gobash, the Labour Minister, told the councillors the labour system faced major challenges that made the task of creating jobs for UAE citizens more difficult. "One challenge is the pattern of economic growth which focuses on one sector much more than the others," he said. "We need a growth pattern that provides jobs for citizens of this country," he said, adding that 65 per cent of the workforce was in the construction and retail sectors. The Emirati workforce, he said, was expected to double to 500,000 by the year 2020. This increase was significant because it took the nation 37 years to have a labour force of 250,000. At least 90 per cent of that figure was employed in the public sector, he said. "I don't think the public sector is going to be able to absorb this increase. The real challenge is to restructure the economy, which is a matter of federal and local concern." His remarks chimed with sentiments expressed yesterday by Sultan al Mansouri, the Minister of Economy, who emphasised the importance of co-operation among federal and local authorities in the drive to boost economic performance. Mr Gobash said the key to solving many of the labour issues was to bring the labour market under the control of a federal body. Currently, the Ministry of Labour is not able to apply labour law to workers in free zones, which are overseen by local authorities, or for housemaids, for whom the Interior Ministry is responsible. Labour law in theory applied to the whole labour force, he added. At of the end of 2007, at least 3.1 million foreign workers fell under the jurisdiction of the Ministry of Labour and 2.4 million under the Ministry of Interior. Members of a specialised labour affairs FNC committee, identified in a report discussed yesterday the issue of foreign labour as a major risk with demographic, economic, political and security dimensions. To counter the problem, members of the committee proposed a number of measures. These included raising the minimum salary of people wishing to bring their families to the country from Dh4,000 a month to Dh10,000, for employees who are not provided with accommodation by their companies. The amount for those who have company accommodation would be raised only to Dh8,000. They also proposed raising the minimum required salary for bringing a housemaid from Dh6,000 a month to Dh15,000 a month, with an annual fee, paid to the Government, of Dh7,000. Among other proposals was a recommendation to limit the right to issue work visas to one federal body. FNC members also voiced deep concern over the domination of the labour market by a small number of Asian nationalities. firstname.lastname@example.org * Additional reporting by Reuters