Business | Banking
UAE banking sector robust with strong fundamentals - Al Tayer
The UAE banking sector remains strong with solid fundamentals including Dh181 billion of capital and provisions, Obaid Humaid Al Tayer, Minister of State for Financial Affairs, told the Federal National Council (FNC) on Tuesday.
- By Samir Salama, Associate Editor
- Published: 23:30 December 16, 2008
- Image Credit: Abdul Rahman/Gulf News
- Al Tayer said plans are afoot to introduce a law to ensure banks guarantee deposits.
Abu Dhabi: The UAE banking sector remains strong with solid fundamentals including Dh181 billion of capital and provisions, Obaid Humaid Al Tayer, Minister of State for Financial Affairs, told the Federal National Council (FNC) on Tuesday.
"The capital adequacy ratio in the UAE's banks is 12.6 per cent on average. Yes there are banks which have less adequacy, but the ministerial committee set up to look into measures to contain the impact of the global financial crisis proposed that this ratio be increased to 11 per cent by mid-2009 and 12 per cent by mid-2010," Al Tayer said.
He said the Government injected Dh120 billion into long-term bank deposits to address a liquidity shortage, accounting for 14 per cent of GDP.
"Compared with other countries, it shows we are taking the right steps. The UK injected 20 per cent of GDP, the US 15 per cent of GDP, Russia 8 per cent, while Germany injected 7 per cent of its GDP."
He added the Government is also planning to introduce legislation to ensure banks guarantee deposits. "The legislation will be finalised in a couple of weeks."
Global crisis
Speaking about the global financial crisis and its impact on the UAE economy, Al Tayer said the government is taking the right steps to contain the liquidity crunch and prevent it from becoming an econ-omic slowdown.
Al Tayer said he is positive about the UAE's growth in 2009, and that the government will take necessary measures to tackle the issue, including injecting even more funds into the financial system.
He noted that the global credit markets have dried up as the West faces its biggest financial crisis since the 1930s Depression.
Central banks in the UAE and Saudi Arabia have also guaranteed bank deposits, and Kuwait's central bank reduced its benchmark discount rate to boost confidence in banks.
About 75 per cent of bank deposits are held by UAE nationals, while inter-bank deposits stand at 12.7 per cent of total assets.
"The year 2008 was almost over when the global financial crisis hit us. We might not see too much reflection of it in 2008, but reflection will be seen in 2009. The slowdown will impact all countries of the world," Al Tayer said.
Al Suwaidi predicted that the UAE's credit growth would also slow down next year. "I think, we will see 5 per cent to 10 per cent credit growth in 2009... We will have maturing corporate debts in 2009, 2010 and 2011. I think we will find a solution to the maturities coming in these years."
He said the UAE will spend on infrastructure to maintain economic growth, but admitted the real estate sector will be adversely affected by the economic slowdown. However, Al Suwaidi said the construction sector will not slow.
"The government doesn't have intentions to stop infrastructure and government projects," said Al Suwaidi. "The government departments will find prices attractive enough to undertake major public infrastructure projects."
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