Foreign deposits up Dh13bn

Foreign banks boosted their deposits in the UAE banking system by more than Dh13 billion in June to return to their level at the start of the year and widen the sector’s asset gap with external markets, official data showed.

From around Dh58 billion at the end of May, their deposits with the UAE’s 51 banks swelled to nearly Dh71.7 billion at the end of June, showed the figures published in the Central Bank’s latest monthly bulletin.

The increase pushed the foreign banks’ deposits with the UAE’s 23 national banks and 28 foreign units to their level at the start of
2012 but they remained far below their peak of around Dh211 billion at the end of 2007, when many international banks pushed into the UAE market for better investment opportunities amidst speculation regional states would hike their currencies against the US dollar to which they are currently pegged.

The rise pushed up the UAE banks’ total foreign liabilities to around
Dh319.7 billion at the end of June from Dh294 billion at the end of May.

Their combined foreign assets shrank to nearly Dh276 billion from
Dh286 billion in the same period, the report showed.

The decline in foreign assets allied with higher foreign liabilities to sharply widen the debt position of UAE banks as their net foreign asset gap surged to Dh32 billion from around Dheight billion in the same period.

A breakdown showed foreign banks deposits with the UAE banks included around Dh13.8 billion in demand deposits at the end of June compared with Dh111.3 billion at the end of May. Time deposits surged0 to nearly Dh57.9 billion from around Dh46.6 billion.

The deposits by foreign banks had hit an all time high of nearly Dh211 billion at the end  of 2007 at the height of speculation that the UAE and other Gulf oil producers would appreciate their currencies against the US dollar.

Speculation began to recede after the UAE Central Bank repeatedly ruled out such plans and came almost to a standstill in 2009 after the country decided to withdraw from the monetary union launched by Saudi Arabia, Kuwait, Qatar and Bahrain. The other GCC member, Oman, also pulled out in late 2007.

The drive by speculators to pull their funds out of the UAE and other Gulf nations gained momentum after the eruption of the 2008 global fiscal crisis as foreign banks struggled to meet commitments and bridge a liquidity gap at home.

The Central Bank report showed UAE banks’ deposits with banks abroad edged up slightly to around Dh101.8 billion at the end of June from
Dh100.2 billion at the end of May. Investment in foreign securities rose to about Dh51.8 billion from Dh49.5 billion while loans grew slightly to Dh77.6 billion from Dh77.1 billion.

Follow Emirates 24|7 on Google News.