21 April 2009
The easing of liquidity in the system has ended the strong drive by UAE banks to raise corporate deposits at high rates, bankers told Emirates Business.
This has also pulled the Emirates interbank offered rate (Eibor) from its recent peak of close to five per cent during October-November, to about 2.6 per cent as of yesterday. However, Eibor still stays far higher than Libor for comparable tenors.
"While the three-month Eibor is currently at 2.6 per cent, the Libor for that tenure is at 1.11 per cent. Likewise, the six-month Eibor and Libor are at 2.96 per cent and 1.64 per cent, respectively. Ideally, the difference should be in the range of 10 to 20 basis points since the dirham is pegged to dollar," said a foreign bank's treasury head.
"The pressure is easing and I don't think any banks are now paying the high rates they used to pay for deposits a few months ago," said Rick Pudner, Chief Executive of Emirates NBD, the country's largest bank by assets.
Leading banks had increased their payout on deposits to as high as 7.5 per cent per annum in the case of Commercial Bank International. Abu Dhabi Commercial Bank was advertising a seven per cent rate and HSBC more than five per cent.
Some bankers told this paper they used to bid for corporate deposits at rates higher than those any other bank would offer for the same. A senior official said in November: "At this point of time it is not the rate that matters; on the contrary, we are forced to create liquidity at any cost."
Some high net worth customers are said to be getting calls from their banks alerting them to an imminent drop in interest rates on their deposits. Some large international corporate houses are said to have used the opportunity to do arbitrage between the dollar rates in their market and the high rates for dirham deposits in the UAE. "The new trend is that many locals have brought back their funds from outside to park them in UAE banks and I think this is going to continue," said Ashok Gupta, Chief Executive of GCC operations at Bank of Baroda, the only Indian bank in the UAE to run fully fledged branch operations.
The easing of liquidity in the system has ended the strong drive by UAE banks to raise corporate deposits at high rates, bankers told Emirates Business.
This has also pulled the Emirates interbank offered rate (Eibor) from its recent peak of close to five per cent during October-November, to about 2.6 per cent as of yesterday. However, Eibor still stays far higher than Libor for comparable tenors.
"While the three-month Eibor is currently at 2.6 per cent, the Libor for that tenure is at 1.11 per cent. Likewise, the six-month Eibor and Libor are at 2.96 per cent and 1.64 per cent, respectively. Ideally, the difference should be in the range of 10 to 20 basis points since the dirham is pegged to dollar," said a foreign bank's treasury head.
"The pressure is easing and I don't think any banks are now paying the high rates they used to pay for deposits a few months ago," said Rick Pudner, Chief Executive of Emirates NBD, the country's largest bank by assets.
Leading banks had increased their payout on deposits to as high as 7.5 per cent per annum in the case of Commercial Bank International. Abu Dhabi Commercial Bank was advertising a seven per cent rate and HSBC more than five per cent.
Some bankers told this paper they used to bid for corporate deposits at rates higher than those any other bank would offer for the same. A senior official said in November: "At this point of time it is not the rate that matters; on the contrary, we are forced to create liquidity at any cost."
Some high net worth customers are said to be getting calls from their banks alerting them to an imminent drop in interest rates on their deposits. Some large international corporate houses are said to have used the opportunity to do arbitrage between the dollar rates in their market and the high rates for dirham deposits in the UAE. "The new trend is that many locals have brought back their funds from outside to park them in UAE banks and I think this is going to continue," said Ashok Gupta, Chief Executive of GCC operations at Bank of Baroda, the only Indian bank in the UAE to run fully fledged branch operations.
By CL Jose
© Emirates Business 24/7 2009
