The United Arab Emirates (UAE) government has earmarked 70 billion dirhams (19.1 U.S. dollars) to the country's banking sector, the official Emirates News Agency reported on Tuesday.
UAE Vice President and Prime Minister Sheikh Mohammed bin Rashid Al Maktoum ordered the money transfer to the Ministry of Finance so that it can inject liquidity into the national banking sector.
On his instructions, the Ministry of Finance and the UAE Central Bank have been assigned the task of injecting the liquidity into the banking sector.
This is another move of country's leadership to provide all required guarantees to support the banking sector in the UAE and to protect it from the global financial crisis, WAM said.
It also reflects the quick response of the UAE government in term of providing whatever could guarantee stability for the financial and banking sector in the country, WAM added.
The UAE government has so far provided a total of 120 billion dirhams (32.7 dollars) for the country's banking sector to ease the liquidity situation.
On Sept. 22, the UAE Central Bank announced that it would set up an emergency lending facility worth 50 billion dirhams (13.6 billion dollars) for banks operating in the country.
In addition, the bank announced last Wednesday a two-percentage-point cut in its lending rate to 3 percent in a bid to boost liquidity of local banks.
It also lowered the rate on its re-purchase of certificate of deposit (REPO) from 2 percent to 1.5 percent with effect from last Wednesday.
Earlier this week, the UAE government decided to take a series of preventive measures that aimed to shore up the country's financial system to stave off any possible breakdown.
Among the measures, the UAE government will ensure that no UAE national bank will be exposed to credit risks, guarantee deposits and savings in all national banks and deposits in foreign banks with "significant operations" in the country.
The UAE government will also guarantee all inter-bank lending operations between banks operating in the UAE and inject sufficient liquidity in the financial system if and when necessary.
Despite all the moves aimed to boost local banks' liquidity, the cost for banks to borrow money from one another has been on the rise.
The one-month Emirates Interbank Offered Rate rose to 4.63 percent on Sunday from 3. 64 percent on Sept. 23.
Source:Xinhua
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