UAE's bank deposit guarantee will last three years

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DIRHAM DECISION: The UAE's decision to guarantee bank deposits will last for three years. (Getty Images)

The UAE's decision to guarantee bank deposits will last for three years and also cover foreign banks with core operations in the Gulf Arab commercial hub.

The UAE government promised on Sunday to guarantee bank deposits and protect national banks from credit risks, the official WAM news agency said on Monday.

"We are determined to protect our financial and banking system out of keenness to preserve the interests of our country and people," Ruler of Dubai Sheikh Mohammed had previously told a cabinet meeting on Sunday.

The UAE federal government will ensure that no UAE national bank will be exposed to credit risks, guarantee deposits and savings in all national banks, guarantee all inter-bank lending operations between banks operating in the UAE and inject sufficient liquidity in the financial system if and when necessary. (Reuters)

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READERS' COMMENTS

all currencies?
Posted by Paul, Dubai, UAE on Monday 13 October 2008 at 11:02 UAE time


It seems to me that these worldwide government guarantees might quickly be viewed as worthless, in the same way Iceland's were. It is always possible for a government to guarantee deposits in its own currency (as it can just print more and effectively devalue it to pay up). But in USD, EUR, GBP?

All other countries have seen their currencies fall heavily against the USD in the last 2-3 months. But the UAE peg means the AED cannot. In the same way the UAE central bank has struggled to keep the AED down over the last few years, it may now suddenly be faced with the reverse - trouble keeping it up. Investors in the UAE stock market have been cashing out and converting to USD to take out. It seems logicial that those holding cash and UAE assets like property might also do the same if holding the AED up starts to become a problem for the UAE central bank. A quick devaluation might be seen as an easy option to dissuade people from moving out of AED.

A shot in the arm
Posted by Cholo Jopson, Dubai, UAE on Monday 13 October 2008 at 10:16 UAE time


The UAE federal government assurance to guarantee bank deposits albeit three years will further boost confidence among bank investors, depositors and other customers. It would unleash the customer's mind from the worst scenario of bank runs and other web of bankruptcies wrought by recent financial stupor in the United States. It would likewise enhance social and economic stability in the country amid financial uncertainty looming across the globe.

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