“When there is a need, then of course we will consider, but there is no need for the time being,” Al Suwaidi told reporters in Abu Dhabi. “The liquidity is good,” he added.
The Central Bank of the UAE and Ministry of Finance injected about Dh120 billion at the beginning of the credit squeeze in the country in late 2008 to ward off fears of the financial crisis getting deeper. However, some analysts and bankers have recently commented on the need for pumping more liquidity into the system, to help banks write off bad loans from their balance sheets, and boost lending to power economic growth of the Arab world’s second largest economy.
The head of a Dubai-based bank was quoted by an Abu Dhabi newspaper on Tuesday as saying that the banking sector in the UAE needs a further injection from the government on top of the Dh120 billion already spent to help shore up bank finances since 2008.
“The banking sector in the UAE needs continued capital injection,” said Hussain Al Qemzi, the chief executive of Noor Islamic Bank. “I can say we need another Dhs20 billion to Dh25 billion.”
Al Suwaidi said that the UAE’s banking system has not stalled as loans and advances went up 2.3 per cent in the year 2009. “It isn’t a very high growth but it indicates the resilience of the UAE’s banking system,” he said.
“The central bank is behind UAE banks and branches of international banks in the country through the provision of financial facilities when needed,” he assured the bankers gathered at the inauguration ceremony of Deutsche Bank’s first branch in Abu Dhabi on Monday evening.
Earlier, in his speech, Al Suwaidi had termed the UAE’s financing system as “sounder” with adequate liquidity than a year ago. He said foreign inter-bank deposits and medium-term notes and euro commercial papers issued by banks stand reduced by about 20 per cent, as at December 31, 2009.
“Inter-bank deposits of the UAE banking system constitute approximately 10 per cent of the liability and foreign inter-bank deposits constituting five per cent, which is a remarkable reduction as a result of increased reliance on customer deposits sourced within the UAE,” Al Suwaidi remarked.
The central bank governor said that finance plays a very important role in the UAE economy.
“In larger economies they are known as core wheels of economies, and in our economy they are known as the backbone of the economy where figures strongly trade in investment and financial growth,” the governor said.
Henry Azzam, Deutsche Bank CEO for the Middle East and North Africa told reporters that the markets have hit the bottom and started going up in this region.
