Central Bank drew Dh60bn from local banks - Emirates24|7

Central Bank drew Dh60bn from local banks

(SAEED DAHLAH)   


 

The UAE Central Bank has sharply boosted its borrowing from local banks in a bid to absorb swelling domestic liquidity and expand its investments in lucrative markets abroad, according to Central Bank figures.

 

During the first nine months of 2007, the Central Bank attracted nearly Dh60 billion from local commercial banks queuing to invest in its Certificates Deposits (CDs) given their relatively high return and low risks.

 

The rush by both national and foreign banks to buy CDs illustrated the attractive terms of such instruments and the availability of massive liquidity in the market following a sharp rise in deposits with the 49 banks operating in the country.

 

From around Dh32.3bn at the end of 2006, the value of CDs issued by the Central Bank jumped to nearly Dh91.03bn at the end of last September, an increase of about Dh58.7bn in the first three quarters of 2007.

 

It was the highest seasonal increase since the Central  Bank began issuing CDs, which usually have fixed interest rates and are intended to absorb domestic liquidity in the absence of major investment opportunities.

 

The new CDs value in the first nine months of 2007 was far higher than new issues in 2006, when they stood at only around Dh9bn, the figures showed.

 

Bankers said the rush for CDs last year was because most banks had large liquidity and the interest rates on those instruments were relatively attractive.

 

The surge in the banks’ investments with the Central Bank allowed it to sharply boost its foreign assets, with its deposits abroad leaping to about Dh115.5bn at the end of September from Dh57.3bn  at the end of 2006.

 

Its held-to-maturity securities, which are debt securities that a bank has the ability and intent to hold until maturity, also shot up to about Dh61.4bn from nearly Dh43.2bn in the same period.

 

Bankers expected investment in local CDs, which range in maturity from one week to five years, to remain strong after the Central Bank introduced a new CD issue system late last year involving auctions.

 

“A new expanded Central Bank CD issuance system based on auction has been introduced,” the Central Bank said in late November.

 

“Certificates of Deposit, marketable among banks licensed by the Central Bank to operate in the UAE, will be issued in the transferable book-entry form. It will be in Dh, USD and euros at a minimum amount of 1million (nominal value) in the respective currencies.”

 

The Central Bank’s figures showed the latest CDs issue sharply boosted its total liabilities to about Dh183bn at the end of September from Dh101bn at the end of 2007.
 
Also on the liability side, current account and deposits soared to Dh91bn from Dh32.3bn in the same period.

 

The CD issue was reflected in the balance sheet of UAE banks, with their combined deposits with the Central Bank jumping to about  Dh124.6bn at the end of September from Dh58.4bn at the end of 2006.

 

The report showed both national banks and foreign institutions demonstrated strong interest in such instruments.
 
Investments by local banks with the Central Bank swelled to Dh74.9bn from Dh38.4bn and those by foreign institutions to Dh49.7bn from Dh20.01bn.

 

Such a surge was also reflected in a relative stability in the banks’ foreign assets following a rapid growth over the past few years.

 

From about Dh231.9bn at the end of 2006, their foreign assets slipped to Dh229.2bn at the end of September.
 
But total assets leaped to a record Dh1.06trn  from around Dh859bn in the same period.


 

Comments

Comments