Abu Dhabi: US sanctions on Iran will not have any impact on the UAE’s economy, central bank governor Mubarak Rashed Al Mansouri told reporters in Abu Dhabi on Tuesday.
“We don’t expect [any] material impact due to Iran sanctions,” he said, speaking on the sidelines of the Institute of International Finance (IIF) Mena Financial Summit.
Al Mansouri said UAE banks had taken measures to comply with the last sanctions regime and these measures had not been dropped despite the later lifting of sanctions as lenders sought to preserve their relationships with clearing banks in the US.
Al Mansouri also said Bank Melli Iran and Bank Saderat Iran would continue to function in the UAE, allowing them to cater to Iranian nationals working in the country.
8.3%increase in deposits in the UAE’s banking sector
“The two Iranian banks have minimised their activity and are catering [to] Iranian nationals living in the UAE. It is difficult for them [Iranians] to open accounts with other banks,” he added.
Bank Melli Iran and Bank Saderat Iran both have branches in the UAE.
The US reimposed sanctions on Iran starting Monday over its controversial nuclear enrichment programme and asked all individuals and companies to stop dealing with Iran.
It gave exemptions to eight countries to import oil from Iran including Japan, India, China and Turkey, among others.
Speaking on other aspects of the UAE’s economy, Al Mansouri said the banking sector is in a good position to support the economic growth of the country.
6.5%growth in lending in the country’s banking sector
“Liquidity is abundant and you have deposits increasing at 8.3 per cent. Lending to the private sector has gone up to 6.5 per cent.”
On the merger of three banks in Abu Dhabi, the central bank chief said talks were still at the early stages, adding that the process is complex.
Abu Dhabi Commercial Bank, Union National Bank and Al Hilal Bank are in talks for a deal that could form a lender with $113 billion (Dh415 billion) in assets.
“We expect to have more consolidation given that we have super-big banks,” he said, without giving details.
Al Mansouri also said the UAE currency peg to the US dollar had served the country really well.
“When you look at EM [emerging markets] currencies recently and what happened to them, you would appreciate that we have a stable currency for trade and investment. This gives us lot of stability and confidence.”
Despite low oil prices, Al Mansouri said the UAE economy fared well when compared to other countries in the region due to the government’s diversification policies.
“Non-oil contribution to GDP is 77 per cent. This helped country really to take on the shock of low oil prices.”
The lifting of subsidies on fuel and utilities had helped the economy and there was less pressure on the federal and local governments, he added.
When asked whether the central bank would be issuing debt after the recent passing of a federal debt law, Al Mansouri said, “We will only issue as an agent for the government, when the government issues debt, we will be the agent and that includes even sukuk.”