Dubai debt fears ease after bank guarantee
The United Arab Emirates' central bank has said it was offering emergency support for any foreign or local bank facing losses from a potential default in Dubai.
The move comes after state-backed investment firm Dubai World asked to delay payments on its $60bn (£36.8bn) debts last week, sending shockwaves through world markets fearful of losses.
But yesterday the UAE's central bank said it “stands behind” all UAE banks as well as branches of foreign banks operating in the region.
The central bank said it would make available to banks “a special additional liquidity facility linked to their current accounts at the central bank”.
The central bank's intervention aims to prevent a wholesale loss of confidence in the region and a mass exodus of funds.
It said that the UAE banking system was “more sound and liquid” than a year ago, with a “strong base of stable deposits”.
Peter Sands, chief executive of Asian-facing bank Standard Chartered, said the UAE had acted “decisively and pragmatically” in announcing the measures.
“Their support for the banking system will underpin consumer and market confidence in the economy,” he said.
“We are confident that Dubai and the UAE as whole will work through these issues and continue to prosper as a dynamic and vibrant part of the world”
On Saturday, Abu Dhabi hosted a meeting of senior Gulf officials over plans to tackle the crisis.
But according to weekend reports it will not be writing a ‘blank cheque' for its struggling neighbour, which may have to sell off some of the assets piled up in the boom years to meet its obligations.
Dubai World's own investments range from Scotland's historic Turnberry to Nakheel, the developer behind Dubai's luxurious Palm manmade islands.
According to the latest figures from the Bank for International Settlements, UK banks had a $50.2bn exposure (£30.5bn) to the United Arab Emirates at the end of June, although individual figures for Dubai itself are not available.