Saturday 21 February 2009

Banks compete to borrow money

DUBAI // Banks have started offering short-term fixed deposits at higher interest rates to raise their deposit bases, reduce risk and lower their loans-to-deposit ratios, despite constrained liquidity and a tight lending environment.

HSBC is offering rates of 5.05 per cent, 5.75 per cent and 6 per cent for fixed deposit terms of one month, three months and six months, respectively. Standard Chartered is quoting rates of 3.85 per cent, 4.15 per cent and 3.9 per cent for the same terms.

“The banks are now trying to attract deposits to adjust their risk; they need to beef up their depository system to be more immune and less risky,” said Yazan Abdeen, a fund manager at ING Investment Management. “Reducing lending is not the only way to reduce risk.”

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