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123842
Mon, 05/24/2010 - 13:41
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https://oananews.org//node/123842
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Banks invest Dh12bn in foreign loans in March
Abu Dhabi, May 24, 2010 (WAM)- UAE banks used more than Dh12 billion in surplus liquidity, spawned by a surge in government deposits in March, to invest in short-term loans to foreign financial units, Central Bank figures have shown according to a report by "Emirates Business."
It was their highest monthly investment rate in several years and it reflected a continued policy by the banks to shun lending to the domestic market following the global fiscal distress and regional debt default problems.
The Central Bank report showed "money at call and short notice" by the banks leaped from around Dh2.94bn at the end of February to nearly Dh16.1bn at the end of March, an increase of Dh13.16bn.
The investments followed a surge in government deposits with the country's 24 national banks and 28 foreign units to nearly Dh172.2bn at the end of March from about Dh165.7bn at the end of February, the figures showed.
Government deposits had plunged from around Dh192.6bn at the end of 2009 to Dh165.7bn at the end of February before rebounding in March.
Analysts said the rise in government deposits could be due to a sharp increase in the country's oil export earnings after crude prices shot above US$80 a barrel on the back of global economic recovery and rebounding demand.
"It seems that the banks are using surplus funds in quick investment as funds in this category, money at call and short notice, are usually interest-bearing," said an economist at a major Abu Dhabi bank.
"The banks could have used part of those funds in domestic credit, but they appear to be sticking to their cautious lending policy and want to make profits from other activities. On the other hand, domestic demand is also weak."
According to bankers, money at call and short notice includes fund lent to discount houses, money brokers, the stock exchange, bullion brokers, corporate customers, and increasingly to other banks. The money is repayable on demand, whereas short notice money implies that notice of repayment of up to 14 days will be given.
After cash, money at call and short notice are the banks' most liquid assets. They are usually interest-earning secured loans, but their importance lies in providing the banks with an opportunity to use their surplus funds and to adjust their cash and liquidity requirements, the analysts said.
Central Bank figures showed domestic credit by the UAE's 52 banks has remained stagnant despite the recovery in oil prices and the local economy. Their claims on the private sector shrank from around Dh723.8bn at the end of 2009 to Dh711.7bn at the end of February and around Dh707.1bn at the end of March. Claims on the government, a favourite lending target by banks, also remained dormant, edging up slightly from Dh91.8bn at the end of 2009 to nearly Dh92.5bn at the end of March.
The surge in money at call and short notice boosted the combined foreign assets of the UAE banks from around Dh208.8bn at the end of February to nearly Dh220.2bn at the end of March, one of their highest levels.
Despite growth in foreign liabilities by around Dh7bn, the banks' net foreign assets widened from nearly Dh39.3bn at the end of February to about Dh47bn at the end of March, their highest level in nearly two years. – Emirates Business 24|7
It was their highest monthly investment rate in several years and it reflected a continued policy by the banks to shun lending to the domestic market following the global fiscal distress and regional debt default problems.
The Central Bank report showed "money at call and short notice" by the banks leaped from around Dh2.94bn at the end of February to nearly Dh16.1bn at the end of March, an increase of Dh13.16bn.
The investments followed a surge in government deposits with the country's 24 national banks and 28 foreign units to nearly Dh172.2bn at the end of March from about Dh165.7bn at the end of February, the figures showed.
Government deposits had plunged from around Dh192.6bn at the end of 2009 to Dh165.7bn at the end of February before rebounding in March.
Analysts said the rise in government deposits could be due to a sharp increase in the country's oil export earnings after crude prices shot above US$80 a barrel on the back of global economic recovery and rebounding demand.
"It seems that the banks are using surplus funds in quick investment as funds in this category, money at call and short notice, are usually interest-bearing," said an economist at a major Abu Dhabi bank.
"The banks could have used part of those funds in domestic credit, but they appear to be sticking to their cautious lending policy and want to make profits from other activities. On the other hand, domestic demand is also weak."
According to bankers, money at call and short notice includes fund lent to discount houses, money brokers, the stock exchange, bullion brokers, corporate customers, and increasingly to other banks. The money is repayable on demand, whereas short notice money implies that notice of repayment of up to 14 days will be given.
After cash, money at call and short notice are the banks' most liquid assets. They are usually interest-earning secured loans, but their importance lies in providing the banks with an opportunity to use their surplus funds and to adjust their cash and liquidity requirements, the analysts said.
Central Bank figures showed domestic credit by the UAE's 52 banks has remained stagnant despite the recovery in oil prices and the local economy. Their claims on the private sector shrank from around Dh723.8bn at the end of 2009 to Dh711.7bn at the end of February and around Dh707.1bn at the end of March. Claims on the government, a favourite lending target by banks, also remained dormant, edging up slightly from Dh91.8bn at the end of 2009 to nearly Dh92.5bn at the end of March.
The surge in money at call and short notice boosted the combined foreign assets of the UAE banks from around Dh208.8bn at the end of February to nearly Dh220.2bn at the end of March, one of their highest levels.
Despite growth in foreign liabilities by around Dh7bn, the banks' net foreign assets widened from nearly Dh39.3bn at the end of February to about Dh47bn at the end of March, their highest level in nearly two years. – Emirates Business 24|7
