Foreign banks appeared to have halted a drive to withdraw their funds from UAE banks after the country approved a law to guarantee deposits and interest rates remained relatively high, analysts said yesterday.
After a record decline of more than Dh77 billion during 2008 and the first half of last year, the deposits of foreign banks with the country's 52 banks recorded relative stability in the third quarter of 2009, dipping by only around Dh3billion, according to new data by the Central Bank.
Deposits by other institutions recorded an increase in most of 2009 while funds due to other banks jumped by nearly Dh29bn in the first nine months.
From a peak of Dh205.6bn at the end of 2007, deposits of foreign banks with the UAE's 24 national banks and 28 foreign units plunged to nearly Dh175.6bn at the end of 2008. They tumbled further to about Dh128.5bn at the end of June 2009 to bring the total withdrawn funds to Dh77.2bn.
But they rebounded by around Dh5bn to reach Dh133.3bn at the end of July before falling again to Dh125bn at the end of August. The figures showed the deposits edged up again to Dh125.7bn in September.
"The reason for this relative stability in foreign liabilities, mainly foreign deposits, is that inter-bank rates in the UAE are now higher than those in Europe and this is encouraging foreign banks to keep funds in the country's banking system," said Humam Al Shamma, a financial analyst at the Abu Dhabi-based Al Fajr Securities, a key UAE stock brokerage and financial firm. "Another major factor is that the foreign banks appear to feel more secure to invest in the UAE following the approval of a law to guarantee deposits,"
Central Bank figures showed one-year term Eibor stood at 2.46 per cent on January 30. Six month rates stood at 2.23 per cent and those for three months at 1.99 per cent.
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