Dollar peg here to stay: UAE Central Bank

The UAE has become a net lender in the international money markets with the country's banking system moving from a "deficit position to surplus position in liquidity", the UAE Central Bank said Tuesday in a statement, citing an internal report submitted by Assistant Governor for Banking Supervision. Latest central bank data issued last month showed bank deposits in the UAE increased 0.2 per cent during June over the previous month, reaching Dh1.126 trillion. During the same month, bank loans and advances (net of provisions and interest in suspense) increased by 0.7 per cent, reaching Dh1.056 trillion, and total bank assets increased by 0.2 per cent, reaching Dh1.707 trillion. Reversal of situation Commenting on the development, National Bank of Abu Dhabi's Chief Economist, Giyas Gokkent told Gulf News: "UAE banking system has foreign assets and also foreign liabilities. In 2006 foreign assets of the banking system exceeded foreign liabilities. Then, in 2007 the situation reversed. More recently, foreign assets had come close to foreign liabilities. This was as of May. The central bank statement suggests that dependence on foreign funds for the banking system is less of an issue than before; the point they are making I assume is that vulnerability is less." Article continues below The board of the apex bank yesterday also reviewed the report of the manager-in-charge of the Financial Stability Unit, which showed that "banks are in a good position and should not be negatively impacted by the recent turmoil in international markets". The central bank reaffirmed yesterday that the UAE dirham's peg to the US dollar would continue. "On the issue of the exchange rate policy, the Board of Directors affirmed that the peg of the dirham to the US dollar is continuing without change," the statement said. The central bank's stance on the dollar peg yesterday follows a senior UAE Central Bank official's comments on the issue earlier this week and a statement issued by the apex bank in late July.