The banking system has a Dh110 billion (US$29.94bn) shortfall between loans and deposits that the Government must make further efforts to close, says Sultan al Suwaidi, the Central Bank Governor.
“The current situation requires a stimulus plan for banks and the economy in view of this ‘gap’, which could be bridged in collaboration with the Ministry of Finance,” Mr al Suwaidi said at the 10th meeting of the Dubai Economic Council, according to a statement published on WAM yesterday.
Mr al Suwaidi was referring to one of the most persistent challenges for the country’s banks, and for the economy, in the current financial crisis: how to keep banks lending while keeping to a Central Bank rule that requires the amount of loans not to exceed deposits. As a group, banks’ loans now exceed deposits by a significant margin and many banks are cutting back lending in an effort to bring the ratio back into line.
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