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Sun 28 Mar 2010 01:24 PM

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UAE says banks strong enough to face a new crisis

'Banks have enough capital to face any crisis, if another one happens,' says official.

UAE says banks strong enough to face a new crisis
POSITIVE: UAE lenders have sufficient capital reserves to be able to withstand new economic shocks, a Finance Ministry official said.

UAE lenders have sufficient capital reserves to be able to withstand new economic shocks, a Finance Ministry official said.

“Banks have enough capital to face any crisis, if another one happens,” Finance Ministry Director General Younis Al Khoori said in Abu Dhabi on Sunday.

A debt-repayment plan last week by Dubai, the second-largest of seven UAE sheikhdoms, offered creditors of a state-run holding company terms that were better than expected, he said.

The global financial crisis froze credit markets and choked off lending in the country, leading to defaults as businesses or homeowners found it harder to access cash. The UAE in October 2008 announced a plan to pump funds into lenders, while it set up a $13.6bn credit facility and said it would guarantee the deposits of local banks.

The economic slump following the credit crunch exacerbated problems for Dubai and its state-owned companies, which ran up $80bn in debt through the end of 2008. Dubai World and property unit Nakheel said in November they planned to delay payments on $26bn in borrowings to May, sparking a plunge in developing-nation stocks and doubling the cost to protect against default by Dubai.

Dubai will support Dubai World’s debt restructuring with $9.5bn as the state-owned holding company asks creditors to wait up to eight years to get all their money back, the government said last week.

“The Dubai government’s offer is better than expected for institutions that have exposure to Dubai World and Nakheel,” Khoori said. “The effects are very positive on local banks, foreign banks and financial institutions.”

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Simon 10 years ago

"Banks have enough capital to face any crisis, if another one happens,” Finance Ministry Director General Younis Al Khoori said in Abu Dhabi on Sunday. Has anyone actually asked the banks if they could survive another crisis? I ask because last december, reported on this very website, local bank officials said they had a liquidity shortfall of over $11bln (AED 40bln). Where did they make up that liquidity in just 3mths?. I have to further push the question because as of Jan/Feb 2010 the banks have been hit by record client defaults on loans in ALL catagories, again reported on this very site. Whoever advises these officials should really know whats happening on the ground and not in the clouds!