The UAE central bank on Tuesday met with lenders to discuss the creation of an ''official'' Emirates interbank offered rate as it seeks greater influence over interest rates that haven’t tracked cuts in the repurchase rate.
''The participating banks supported the idea and showed their commitment to taking part in this national exercise.
''The objective behind the initiative of the Central Bank is twofold - primarily to set up an official benchmark for (the) Dirham offered rate and, secondly, to facilitate a process whereby the rates fixed are a fair representation of the prevailing market conditions. ''The rates should also reflect the strength of the domestic banking system,'' the bank said in a statement.
It added that it will carry on further discussions regarding the implementation of the project with the panel of selected banks.
''Once the participating banks and the Central Bank have formalised the regime for EIBOR fixings, the Central Bank will release the relevant details, which will provide full transparency in this respect,'' it noted.
Eibor, (Emirates Interbank Offered Rate) is the benchmark used for banks to charge one another for dirham-denominated loans.
It is currently calculated by a panel of 10 banks including HSBC and Standard Chartered’s local units, as well as Emirates NBD.
''The current interbank rate does not reflect the actual situation,'' Delphine Arrighi, senior rating strategist at Standard Chartered in Dubai told The National newspaper.
''Liquidity has improved since last year and Eibor has declined, but not to the extent of Saudi Arabia,'' she added.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.