UAE's liquidity now in much better position, says Suwaidi

A liquidity problem that hit UAE banks because of the global credit distress has largely eased as they have completely ceased using an emergency fund facility offered by the government, the Central Bank Governor said yesterday.

After withdrawing around Dh10 billion of the Dh50bn facility announced by the Central Bank in late 2008, the country's 52 banks have totally stopped their requests to benefit from those funds, Sultan bin Nassir Al Suwaidi said.

"This facility has not been needed to a great extent at this point because liquidity is now better… At this time, the ratio of utilisation of this facility is zero," Suwaidi told reporters after signing an education agreement with a London institute.

"Liquidity is now much better because markets are moving…they keep moving and changing and that is why sometimes you see huge liquidity, or high liquidity, or medium liquidity or small liquidity…the situation here is now much better and this is an indication that things are stabilising… I am not saying that the situation has greatly improved but there is better stability now."

Asked why banks are still cautious about resuming their normal lending activities, the Governor said: "I think it takes time for the banks to feel comfortable… when they feel comfortable, they will resume lending."

Suwaidi said he was satisfied with the level of deposits with the UAE's 24 national banks and 28 foreign units.

Suwaidi said the UAE had taken measures to deal with the global economic crisis, referring to the Dh50bn facility offered by the Central Bank, the Dh70bn deposits by the federal government and the recent cash injections by the Abu Dhabi Government into the capital of five banks in the emirate.

"There are always ways and means to deal with crises… The federal government and the Central Bank are putting the right programmes to manage the present situation… As you know that in economic crises, all countries try to manage the situation… I am sure the UAE will manage," he said.

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