| Kippreport.com

European leaders and the European Central Bank have not asked the United Arab Emirates for aid to help contain the euro zone debt crisis, the country’s central bank governor said on Tuesday.

Euro zone finance ministers are expected to agree on Tuesday on reforms of their bailout fund, the 440 billion euro European Financial Stability Facility, to expand its effective size through leverage. The EFSF will be able to attract cash from private and public investors to its co-investment funds.

European officials have raised the possibility of China and other cash-rich countries around the world investing, as a way to fight the crisis. But asked whether the UAE had been approached on this issue, central bank governor Sultan Nasser al-Suweidi said: “No, not at all.”

“The Europeans need to organise themselves and they will solve their problems. These problems are of a sovereign debt nature and…can be handled over time, they need time,” he told a news conference.

The central bank said in October it had no exposure to euro zone debt in its reserves and that it only invests in countries and corporates rated AAA, as required by law.

US TREASURIES
Suweidi also said the central bank was investing again in US Treasuries as interest rates were now reasonable. The 10-year Treasury yield hit a record low of 1.72 percent in September and has since rebounded modestly to around 2.0 percent.

“Now, we do (invest in US Treasuries) because the circumstances have changed. The interest rates are now reasonable,” Suweidi said.

“It (volume) is fluctuating depending on what the yield is,” he told reporters, but did not give details.

Gulf Arab oil exporters such as the UAE mainly invest in dollar assets since most peg their currencies to the US dollar with crude oil, priced in dollars, accounting for a majority of budget revenue.

The central bank said in July, when the risk of a US debt default was unsettling markets, that it did not hold any US Treasury bonds and that most of its foreign reserves, though denominated in dollars, were invested in non-US assets.

The central bank’s foreign currency assets edged down to a three-month low of 199.1 billion dirhams ($54.2 billion) in June. But within that total, holdings of foreign securities rose to 86 billion dirhams in June, the highest level since at least 2007, the latest available data show.

Suweidi also said the UAE’s bank lending growth rate of 4 percent since the beginning of the year was “good” under current circumstances.

Asked whether he saw any signs of foreign banks scaling down their activities in the UAE, one of the world’s top five oil exporters, given the headwinds they are facing in Europe, he said: “Even if they scale down their operations they are free to do so. They will scale down and then return.”