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29 March 2024

Slowdown due to global impact

Published
By Reuters

The UAE will see a slowdown in business because of global economic conditions, the Gulf Arab country's Central Bank Governor Sultan Nasser Al Suwaidi said on Monday.     

He reiterated that UAE banks' exposure to sovereign and private sector debt in Europe was "really small".

"We will see a slowdown of business due to an expected economic downturn (globally), due to effects of the European crisis and the situation in the US as well," he told Reuters at a financial forum in Kuwait.

 "There will be an effect on China. China is the main economy to affect the supply of oil...so there will be impact on local economies of the GCC (Gulf Cooperation Council)."     

However, Suwaidi added that China was growing at a very reasonable speed, so he was not very concerned about a severe slowdown there.     

The central bank governor also said he was happy with the UAE's current monetary policy rate of 1 per cent.

Need new liquidity tools for Basel

The UAE needs to find new liquidity tools to ensure its banks will be able to implement new global rules under the Basel III accord, the UAE's Central Bank Governor Sultan Nasser Al Suweidi said on Monday.

Suweidi was speaking at a financial forum in Kuwait.

Although UAE banks have high capital levels -- their average Tier 1 capital ratio is about 11 per cent -- liquidity rules are expected to be more of a challenge for them, as they prepare to meet the Basel III banking standards that will take effect around the world over several years from 2013.

One reason is that Gulf debt markets are not as deep or varied as developed markets, meaning banks have a limited choice of liquid instruments that they can use locally. Basel III will require banks to hold enough cash-like instruments to withstand a month of severe fund outflows.