The UAE should quickly issue the long-awaited debt law to give birth to a bonds market to tap domestic liquidity and allow large firms to obtain funding outside banks, Central Bank Governor Sultan bin Nassir Al Suwaidi has said.
Addressing a Middle East meeting on financial regulations in Abu Dhabi on Monday, Suwaidi said the development of a domestic debt market in the second largest Arab economy should now be a priority for authorities.
He said companies, particularly large private companies and GREs, need an alternative to bank lending on the grounds it is a more reliable source of funding and it is less costly for large corporations.
Banks also would need instruments of the domestic debt market to fulfill the requirements of Basel 3 regarding liquidity ratios, he said.
“As local debt markets are at an infancy stage in many countries in the region, this would make it difficult for banks to hold high-quality liquid debt instruments as preemptive liquidity buffers against early signs of stress as required by Basel 3,” he said.
“Therefore, it is necessary for the UAE now to expedite the issuance of the public debt law and to set up the needed market infrastructure, as a first step on the way to a vibrant domestic debt market.”