The Central Bank's assets gained nearly Dh50 billion in the first five months of 2011 to rise to their highest level since the end of 2007 and the bulk of the increase was in deposits and investment abroad.
Its figures showed certificates of deposits (CDs) issued by the Central Bank and held by the country’s 51 banks also grew by nearly Dh25 billion as risk-averse banks opt for safer investment tools and shun lending to the private sector. The increase also followed the issuance of the country’s first Shariah-compliant CDs.
From around Dh228 bullion at the end of 2010, the Central Bank's total assets swelled to nearly Dh278 billion at the end of May 2011, their highest level since the end of 2007, when they peaked at Dh285.9 billion.
The increase was mainly in the central bank’s held-to-maturity investments, which grew to around Dh188 billion at the end of May from Dh175 billion at the end of 2010. Deposits with banks abroad surged to nearly Dh81.8 billion from around Dh44.5 billion in the same period.
On the liabilities side, the report showed CDs held by the UAE’s 23 national banks and 28 foreign units soared to around dh119.2 billion at the end of May from Dh94 billion at the end of 2010. At the end of May, they reached their highest level since the end of 2007, when CDs stood at Dh173.5 billion.
CDs have steadily grown over the past year following a sharp decline at the end of 2008, when they tumbled to only around Dh47 billion as banks were in bad need for cash due to a severe shortage in the wake of the global fiscal distress that struck the world’s economic system in September that year.
CDs began to recover through 2009 with the improvement in the banks’ liquidity. At the end of 2009, they rebounded to Dh71.4 billion.
The CD investments fluctuated through 2010 but remained far higher than at the end of 2008 before they peaked at a three-year high at the end of May.
The surge in CD value in May also followed a decision by the central bank in late 2010 to issue Islamic CDs worth Dh3.5 billion. Central bank officials said last week the balance of Islamic CDs held by banks has reached Dh12 billion.
In recent statements, officials said the central bank had issued the Shariah-compliant CDs to Islamic and conventional banks within plans to create new investment tools and keep those banks away from the foreign markets.
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