UAE banks safe from US crisis

An historic credit downgrading of the United States, the world’s largest economy, would have no impact on UAE banks as they have no investment in US securities, a local financial analyst said on Monday. 

Hammam Al Shamma, an adviser at the Abu Dhabi-based Al Fajr Securities, one of the UAE’s largest stocks and investment services firms, was responding to queries whether Standard and Poor’s (S&P) decision on Friday to downgrade the US credit rating to AA+ from the top triple-A mark would inflict any losses on the UAE’s banks, which control the largest assets in the Arab region. 

“According to available information so far, UAE banks do not possess any investments in US securities…this means that the country’s banking sector is not vulnerable to direct risks from the recent US developments,” he said. 

“I believe an indirect impact will be three key fields—oil prices, issuance of new bonds and a decline in the US dollar.” 

Central bank figures showed UAE banks’ investment in securities abroad stood at around Dh54.2 billion at the end of May, nearly a fifth of the banks’ total foreign assets of about Dh270 billion. They also accounted for just 3.2 pr cent of the banks’ overall assets of Dh1,703 billion at the end of May. 

The central bank provided no details of the banks’ securities investments but the report showed deposits with banks abroad remained the largest component of UAE banks’ overseas investments, with such deposits standing at nearly Dh83.3 billion at the end of May. Most of them are time deposits at Dh74.2 billion. 

Banks in the UAE and other Gulf oil producers are still recovering from the crippling 2008 global fiscal distress and a severe regional debt default problem.

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