Monday, May 30, 2011
Gulf News
Abu Dhabi: UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi yesterday urged banks to exert more effort towards reducing the cost of borrowing for current borrowers, particularly the category of businessmen as burdening them with increased costs through higher interest rate margins is not in the interest of banks in the medium and long run.
Speaking at the second consultation meeting for this year in Abu Dhabi with the chief executives of banks operating in the UAE, Al Suwaidi said: At this meeting, I would like to point out that borrowers and especially merchants/businessmen are complaining about high interest rate margins on their financial budgets.
He added: The key question is banks change terms. Borrowers are the basis for growth and the prosperity of the banking business. I urge you to reduce interest rate margins on loans as much as realistically possible, taking into consideration reduced rental income and reduced profits from businesses.
The governor pointed out that the position of liquidity in the banking sector is considered excellent, which is a clear indicator of the favourable banking environment in the UAE.
I want to point out that the liquidity in the banking system is excellent...its abundant. The liquidity is at a comfortable level. Therefore, theres no reason (for the banks) to put pressure on borrowers, Al Suwaidi added.
Later, talking to reporters, Saif Bin Hadef Al Shamsi, senior executive director and head of treasury at the UAE Central Bank said the liquidity situation of the banks has improved substantially.
We expect EIBOR (Emirates Interbank Offered Rate) will go down further because the liquidity situation has improved, said Al Shamsi.
He said the banks have invested Dh115 billion in certificates of deposit with the Central Bank.
Banks surplus of liquidity is parked with the Central Bank, said Al Shamsi.
A banker who attended yesterdays meeting at the Central Bank told reporters on the condition of anonymity that as matters stand, lending rates cannot be linked to EIBOR unless deposit rates are lower than EIBOR.
We are not able to benchmark lending rates with EIBOR as the deposit rates are well above that level. The six-month EIBOR, as of today, is 2.06 per cent while the six-month deposit rates range between 3 per cent and 3.5 per cent, or even more. The banks will be able to reduce the lending rates if the deposit rates come down, said the banker.
Michael Tomalin, chief executive of the National Bank of Abu Dhabi, told Gulf News on the sidelines of yesterdays meeting the liquidity situation is much better.
The meeting was attended by 54 CEOs or their representatives from national, GCC (Gulf Cooperation Council), Arab and international banks, besides concerned executive directors and officials of the UAE Central Bank.
By Himendra Mohan Kumar, Staff Reporter
Gulf News 2011. All rights reserved.
