The United Arab Emirates' central bank said Sunday it has notified domestic and foreign banks with branches in the country that they would have access to "a special additional liquidity facility."
The offer comes after Dubai World, the conglomerate that has long been the chief engine behind Dubai's explosive growth, announced Wednesday it needed at least a six-month reprieve from paying its nearly $60-billion US debt. The news sent global markets tumbling.
Mideast markets were unaffected because of an extended Islamic holiday, but they reopen Monday.
"There is concern," said John Sfakianakis, chief economist at the Riyadh, Saudi Arabia-based Banque Saudi Fransi-Credit Agricole Group. "They're trying to take preventive measures in order to lower the risk of a run on the local banks."
"Depositors could very well panic … and they could decide to take their money out of the banking system," he added.
The UAE has been guaranteeing bank deposits since October 2008, but the pledge for new help at generous terms stems from concern that UAE banks have some of the biggest exposure to Dubai World's debt. Several have been downgraded by international ratings agencies or been placed on review for downgrades.
Monday, November 30, 2009
UAE aids banks amid Dubai meltdown
Probably there was no good alternative. The question is, will this help?