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Sat 28 Nov 2009 08:10 AM

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Moody's not to change UAE banks' ratings for now

UAE banks with largest exposures to Dubai World remain on review - ratings agency.

Moody's will not implement any changes to UAE banks' ratings for now given that the banks that have sizeable exposures to Dubai World are either already on review for possible downgrade or carry a negative outlook on their deposit ratings.Based on an initial assessment of the exposures of rated banks in the UAE to Dubai World and its subsidiary Nakheel, ratings agency Moody's Investors Service said that it will not implement any rating changes for now given that the banks that have sizeable exposures to Dubai World are either already on review for possible downgrade or carry a negative outlook on their deposit ratings.

“Moody's announcement is in response to the decision by the government of Dubai to seek a six-month "standstill" period for repaying the debts that are due by Dubai World, one of the largest Dubai government entities, and its subsidiary Nakheel, the property development company,” John Tofarides, Banking Analyst at Moody’s in Dubai said in a press release.

The UAE banks that are on review for downgrade are Dubai-based banks: Emirates NBD, Mashreqbank, and Dubai Islamic Bank, Moody’s added.

Although the recent developments have increased the likelihood of downgrades of bank financial strength ratings (BFSRs) for the banks that are already on review, Moody's notes that their debt and deposit ratings will continue to benefit from systemic support from the federal government of the UAE, Tofarides said.

“Moody's also acknowledges that the stand-still period for negotiating debt and restructuring of Dubai World and Nakheel could potentially leave the Dubai government in a better position to support its other government-related companies,” the statement said.

“Moody's has no reason to believe that the UAE's federal government would abstain from supporting banks in Dubai or in other emirates.”

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