UAE banker urges more state cash for banks: report - Emirates24|7

UAE banker urges more state cash for banks: report

Domestic lending has decreased in the last five months as banks impose stricter borrowing policies. (CRAIG SCARR)

The UAE should inject more cash into the financial sector to catalyse lending and steer the economy through the global financial crisis, chairman of Mashreq Bank said in remarks published on Wednesday.

Abdul-Aziz al-Ghurair, also speaker of the Federal National Council, said the state should consider issuing government bonds and the country's sovereign fund should look into borrowing against its assets to inject liquidity into the sector, local media reported.

"The government has several options to inject liquidity. It is possible for the moneys to be deposited in banks as government deposits so that banks can lend them on," he said.

"The government can also buy large debt from banks especially sovereign debt owed by government entities ... the central bank can also commence direct lending."

New lending in the UAE has lost steam in the last five months as banks become more prudent because they face higher borrowing costs and the prospect that some customers may default on real estate loans as property prices fall in Dubai.

The UAE central bank and finance ministry have together launched Dh120 billion ($32.67 billion) of emergency funding since September to help banks cope with tight credit conditions.

Ghurair said the UAE's wealth fund has "a significant amount of liquidity that can be available to mobilise the local economy and it can also borrow against the assets it holds."

The central bank governor has said he expects credit growth in the second-largest Arab economy would slow to no more than 10 per cent this year, after soaring more than 50 per cent in the year to June. 

 

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