UAE banks boosted their deposits with the Central Bank by nearly Dh33 billion in the first 11 months of 2009 after slashing them by a staggering Dh132bn in 2008 to tackle severe liquidity shortages, according to official data.
From Dh99.7bn at the end of 2008, the combined deposits of the country's 52 banks with the Central Bank soared to nearly Dh132.9bn at the end of November 2009, the Central Bank said in its November bulletin.
Analysts said the increase was a result of growth in the total deposits with the 24 national banks and 28 foreign units during that period.
"Another factor could be the banks wanted to meet reserve requirements by the Central Bank after it slightly increased that requirement last year to curb lavish lending following the global crisis and default problems in the region," said Humam Al Shamma, a senior financial analyst at the Abu Dhabi-based Al Fajr Securities, a key UAE financial and stock brokerage company.
The Central Bank boosted the reserve requirement for banks, under which the banks must keep a minimum level of deposits with the Central Bank, to a record 14 per cent of their total deposits in 2007 and the first half of 2008 to curtail excess lending during the boom period and tackle soaring inflation rates.
It slashed that level in the following months within overall counter-crisis fiscal measures that also included providing the banks with ready cash under its Dh50bn liquidity support facility, which has been partly used by the banks.
At the height of the boom, the deposits of banks with the Central Bank hit an alltime high of around Dh231.1bn at the end of 2007 before plunging to about Dh99.7bn a year later because of lower reserve requirement. The increase in the banks' deposits with the Central Bank in 2009 was coupled with a rise of around Dh90bn in total deposits with the banks to Dh1,000.2bn at the end of November from Dh912.1bn at the end of 2008.
"The increase this year shows the Central Bank is still enforcing a fiscal policy aimed at regulating the lending activities of banks," Shamma said.
"As you notice, it was a tight policy during the oil boom aimed at controlling credit and inflation. This policy was reversed after the crisis," he said.
The surge in the banks' deposits with the Central Bank last year boosted its investments abroad, with its deposits with overseas banks swelling to around Dh107.5bn at the end of November from Dh82.8bn at the end of 2008.
The Central Bank's deposits abroad had peaked at nearly Dh184bn at the end of 2007, when the banks' deposits with it was at their highest level. The figures showed the rise in the banks' deposits with the Central Bank this year pushed up its total assets to Dh227.5bn at the end of November 2009 from nearly Dh193.7bn at the end of 2008. The assets hit an all time high of around Dh285.9bn at the end of 2007. As for certificates of deposits (CDs), the bulletin showed improving liquidity allowed banks to boost their investment in the Central Bank's CDs by about Dh22bn in the first 11 months after plunging by about Dh126bn through 2008.
From around Dh47.1bn at the end of 2008, CDs issued by the Central Bank grew to Dh69.5bn in November.
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