Central Bank sees drop in emergency fund withdrawal

UAE banks appear to have stopped withdrawing funds from the Central Bank under its liquidity support facility introduced just after the global fiscal tremor to bridge a serious liquidity gap in the country, official data showed yesterday.

By the end of 2008, the country's 24 national banks and 28 foreign units have withdrawn a total Dh4.55 billion from the Dh50bn emergency facility to meet lending obligations following the international credit squeeze and the exit of massive funds from the UAE known as hot money.

The figures by the Central Bank showed the funds withdrawn dipped to Dh2.56bn by mid 2009 and remained unchanged at the end of last October.

"This indicates the banks are no longer benefiting from those funds because they do not need them any more," said an economist at an Abu Dhabi bank.

"As you have notice, there has been a marked improvement in the liquidity situation in the UAE over the past few months. I know lending has remained relatively low but this is mainly because banks are just being more careful."

The Central Bank's October bulletin showed total resident and non-resident deposits with the UAE banks grew by around 7.6 per cent to nearly Dh982.8bn at the end of October from Dh912.1bn at the end of 2008. Resident deposits surged to Dh898.2bn from Dh833.4bn and non-resident deposits to Dh84.5bn from Dh78.7bn in the same period.

A breakdown showed the increase was in both public and private deposits, indicating returning investor's confidence in the UAE financial sector.

Public sector deposits swelled from Dh44.7bn at the end of 2008 to Dh52.9bn at the end of October 2009 while private sector deposits soared from around Dh338.4bn to Dh377.5bn.

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