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UAE: to bond or not to bond

UAE federal finance ministry director general Younis Al Khouri tells Dominic O’Neill about plans to help the local financial sector, above all by creating a dirham bond benchmark. Are the emirates united enough?

DESPITE OIL WEALTH and purpose-built financial centres, Gulf banks have failed to achieve the global status enjoyed by banks of other emerging-market regions. Now regional political upheavals add to the lingering effects of the oil, stock and property crashes that followed the Lehman Brothers collapse.

In the United Arab Emirates, even in Abu Dhabi, competition for local deposits is still intense, even though banks have become more conservative lenders, partly thanks to debt restructurings at government-linked corporates in Dubai. The average loan-to-deposit ratio in UAE was just under 99% at the end of 2010, according to the central bank. Governor Sultan Bin Nasser Al Suwaidi thinks that’s too high and wants it to fall, possibly to as low as 85%.

Abul-Aziz Al Ghurair, speaker of the federal legislature and chief executive of Mashreq, one of Dubai’s biggest banks, was quoted in local media last month as saying: "We are now in a new phase [in the post-crisis domestic economy] that requires new decisions and new measures." He said such measures should include a new window for bank funding at the UAE central bank, as well as getting the country’s sovereign wealth funds to lend Dh150 billion ($42 billion) to UAE banks until the economy recovers.

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