UAE guarantees banks and deposits
- added October 12, 2008
- 1 responses
The Government moved aggressively to underpin the country’s banking system, guaranteeing all banks and deposits as part of a sweeping financial package.
The decision, released by the government news agency WAM, was accompanied by a statement from Sheikh Khalifa bin Zayed, President of the UAE and Ruler of Abu Dhabi, saying that the economy is strong and the local financial sector is efficient.
The move comes amid unprecedented turmoil in the global financial system. Heads of the developed economies of the world, along with the International Monetary Fund, are meeting in Washington, DC to come up with measures to stem the hemorrhaging in markets.
Local banks have steered clear of many of the problems plaguing lenders elsewhere. But the impact of the global financial crisis has hit here in recent weeks as money has rushed out of the country’s banks and financial markets amid the larger crisis. That has sent equity markets plunging and constrained bank lending as deposits have shrunk and borrowing from abroad has become markedly more expensive or impossible for many banks.
Last week, countries around the world started a round of historic, but piecemeal, attempts to protect their financial sectors and economies as panic spread. Several countries, including Ireland, Germany, the UK and Japan, have moved to protect all consumer deposits or raised the limits on deposit protection. Meanwhile, pressure has grown for big economies, including the US, to begin nationalizing banks, as Iceland did last week.
Many banks in the UAE are already owned in part by the government, so many investors and depositors had long assumed the government would stand behind them. But the announcement was the first explicit moves the government has taken to do so.
The decision, released by the government news agency WAM, was accompanied by a statement from Sheikh Khalifa bin Zayed, President of the UAE and Ruler of Abu Dhabi, saying that the economy is strong and the local financial sector is efficient.
The move comes amid unprecedented turmoil in the global financial system. Heads of the developed economies of the world, along with the International Monetary Fund, are meeting in Washington, DC to come up with measures to stem the hemorrhaging in markets.
Local banks have steered clear of many of the problems plaguing lenders elsewhere. But the impact of the global financial crisis has hit here in recent weeks as money has rushed out of the country’s banks and financial markets amid the larger crisis. That has sent equity markets plunging and constrained bank lending as deposits have shrunk and borrowing from abroad has become markedly more expensive or impossible for many banks.
Last week, countries around the world started a round of historic, but piecemeal, attempts to protect their financial sectors and economies as panic spread. Several countries, including Ireland, Germany, the UK and Japan, have moved to protect all consumer deposits or raised the limits on deposit protection. Meanwhile, pressure has grown for big economies, including the US, to begin nationalizing banks, as Iceland did last week.
Many banks in the UAE are already owned in part by the government, so many investors and depositors had long assumed the government would stand behind them. But the announcement was the first explicit moves the government has taken to do so.
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When banks all over the world are worried about having enough credit to cover their loans AND people are worried about losing their deposits, it makes sense to declare that all deposits will be guaranteed, since then people will withdraw their cash and deposit in a guaranteed account.
It means that you end up with plenty of capital and you're one step ahead of everyone else, the problem is that it will crash banks in countries that haven't guaranteed deposits!
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- phillyharper
- 1 month ago
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