By Sarah Townsend
EIBOR must properly reflect the cost of funding to banks, says Abdul Aziz Al Ghurair
Deloitte has been enlisted to examine how interest rates can more accurately reflect the costs to UAE banks, it has emerged.
A new initiative by the UAE Central Bank and the UAE Banking Federation (UBF) aims to examine how the UAE’s interbank offered rate (EIBOR) is calculated, UBF chairman Abdul Aziz Al Ghurair revealed on Sunday.
He told media: “We want to be transparent and accurate. We don’t know whether the current IBOR is overstating or understating the current cost of funding – that is, how much it costs banks to raise additional funds from large deposits – but we want the industry to reflect the true cost of funding.
“So we have engaged a consultant (Deloitte) to bring us best practice in calculating EIBOR. Our aim is to agree on a process, a principle and be transparent.”
Al Ghurair said that Deloitte was looking at “a total revamp of the whole A to Z of [what was previously called] interbank borrowing”.
The UAE Central Bank has also engaged an auditor to conduct monthly audits of 11 participating banks as part of the study.