Business | Banking
UAE banks eye emergency window as credit tightens
Interest rates in the UAE tightened further on Sunday as a credit crisis deepened and banks prepared for the possibility of having to draw upon emergency cash from the central bank.
- Reuters
- Published: 23:56 September 28, 2008
Dubai/Abu Dhabi: Interest rates in the UAE tightened further on Sunday as a credit crisis deepened and banks prepared for the possibility of having to draw upon emergency cash from the central bank.
Interbank lending rates climbed as banks scrambled for short-term cash to cover obligations and made preparations to access a Dh50 billion emergency lending window opened by the UAE central bank.
"The issue here is short-term liquidity," said the treasurer at a Dubai bank.
Investors have fled stocks and withdrawn deposits placed in anticipation of a major dirham revaluation. Gulf Arab central banks dampened those hopes in recent weeks by reaffirming their commitments to currency pegs.
"The liquidity shortage, which is global, is exacerbated in Dubai by the speculative flows in the currency being reversed so quickly," the treasurer said, adding that he was making the necessary preparations to tap the central bank facility in case his bank ran short of funds.
One-month rates rose to 3.95625 per cent compared to 3.7625 per cent on Thursday, continuing its steady climb since early June.
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