A legislation approved by Federal National Council is expected to allow The Finance Ministry and central bank of the UAE to exercise control on bonds, medium-term notes and Islamic sukuk of domestic banks that receive a government guarantee, reported Bloomberg.
Banking institutions in the emirate nation faced with severe scarcity of funds as the global financial turmoil had prevented their access to foreign borrowing, and investors speculating on a currency revaluation drained money from it. According to Sultan Bin Nasser al-Suwaidi, Governer of Central Bank, UAE, the gap between commercial bank loans and deposits in the nation surged to $30 billion in March, before plummeting to approximately $24 billion.
Analysts opine that the legislation is aimed at helping the nation’s budding bond market by shoring up investor confidence in issuances by the private sector. In an interview with Bloomberg News, Mr. al-Suwaidi said: “This is a temporary measure, in the sense that, financial institutions otherwise should function without government support. We will start with banks though the law may be extended beyond banks.”
