The United Arab Emirates kept banks guessing on Wednesday about the structure of a 50 billion dirham ($13.62 billion) emergency funding facility designed to cope with a global liquidity crunch.
Two days after the central bank announced the facility, bankers in the world's fifth-largest oil exporter were still wondering if it would buy debt, such as bonds or certificates of deposit, in return for funds or directly inject cash into the system. They called on the central bank to give more details to avoid adding to uncertainty in financial markets already uneasy over the US financial crisis.
"We need to know at the earliest the modus operandi of this facility because of the constraints in the money markets," said a banker in the money markets division at an Abu Dhabi bank. "The central bank may deal on a case by case basis and deal accordingly with banks in need of funds. There have been some rumblings but we are expecting details of the terms of the facility very soon," he said.
Central Bank officials in treasury and communications departments declined to comment when Reuters called. The UAE facility was announced on the heels of a $700 billion US government bailout plan aimed at easing the crisis that has put pressure on markets around the world, including the Gulf Arab region that is booming on the back of high oil prices.
Interbank lending rates rose on Tuesday as markets awaited details of the facility. Loan growth in the second-largest Arab economy has been growing at a faster pace than deposit growth. As a result, banks have had to rely heavily on external sources for funding, many of which have dried up in the global squeeze.
Money market rates have risen more than 160 basis points since early June as liquidity conditions tightened. "There is no clarity on this. Banks and even the markets are waiting," said a treasury manager at another Abu Dhabi bank. "We have no details but we may get some guidance today."
Comments
Comments are closed.