UAE cbank calls for lower interbank rates -paper

UAE cbank calls for lower interbank rates -paper

UAE banks need to raise deposit levels to reduce interbank lending rates-paper.

November 25, 2010 1:47 by Reuters

UAE banks need to raise deposit levels to reduce interbank lending rates and put them more in line with London Interbank Offered Rates (Libor), the central bank governor was quoted as saying on Thursday.

UAE interbank rates (EBOR) have stayed high over past months, sparking criticism from the central bank, although debt restructuring and a flood of dollar liquidity on global markets have helped to ease some of the pressure.

“The gap between the two prices (of EBOR and LIBOR) must be bridged,” Sultan Nasser al-Suweidi told local daily al-Ittihad.

Deposits should rise by 40 billion dirhams ($11 billion) in order to achieve this, he said, which would also help to narrow the loans-to-deposit ratio in the Gulf Arab state.

“This is not a big amount in comparison to the more than 1 trillion dirhams’ worth of deposits in the banking sector in the UAE,” he said.

(Writing by Raissa Kasolowsky; Editing by Ruth Pitchford)