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Wed 22 Dec 2010 05:05 PM

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UAE cenbank says not changing bank reserves

Liquidity of banks operating in the country is good - Seif Al Shamsi

UAE cenbank says not changing bank reserves
ADEQUATE LIQUIDITY: UAE has no intention to modify the minimum mandatory reserves for banks at the current stage (Getty Images)

The UAE's central

bank has no intention of changing the minimum reserves for banks

as liquidity of banks operating in the country was good, a

senior central bank official was quoted as saying on Wednesday.

The central bank of the UAE, the world's third biggest oil

exporter, had no intention to modify the minimum mandatory

reserves for banks at the current stage, Seif Al Shamsi,

executive director for the treasury department at the UAE

central bank, told Arabic language daily Al Khaleej newspaper.

Lending in the UAE's banking sector have almost come to a

standstill when the financial crisis and the Dubai debt crisis

hit the region and the emirate's real-estate driven boom came to

a halt.

Measures adopted by the central bank regarding banks'

liquidity reflect good conditions and do not call for central

bank intervention, Shamsi told the paper.

Money supply (M3) in the Arab world's second-largest economy

grew 5.1 percent year-on-year in October, the fastest rate this

year, after a 2.0 percent rise in the previous month, central

bank data showed.

Bank provisions for bad loans rose to AED39.6bn in October, the highest level this year, up 4.8 percent

from September and 36.6 percent from October 2009.

The UAE finance ministry said this month it expected to

launch a new credit bureau within the next six months to help

banks, already exposed to debts of Dubai's state-linked

companies, assess individuals' credit worthiness.

The central bank has given banks operating in the country

facilities with maturities of not more than three months in

September 2008 to help them cope with the effects of the global

financial crisis.

Shamsi said in November he was still concerned about levels

of interbank offered rates despite an improvement.

UAE interbank rates have stayed high over past months,

sparking criticism from the central bank, with banks exposed to

Dubai debt, but debt restructuring and a flood of dollar

liquidity on global markets have helped to ease pressure.

The UAE three-month offered rate stood at 2.14375 percent

at the central bank's fixing on Wednesday, near its

lowest levels since January, but still above the Saudi benchmark

at 0.75125 percent