U.A.E. Central Bank Should Add Liquidity, NBAD Says

The United Arab Emirates’ central bank should either buy securities from local banks to help ease liquidity in the economy or loosen a cap on lending, the chief executive officer of the country’s second-biggest bank said.

“There has to be either some quantitative easing by the central bank broadly speaking by buying in securities” from banks and giving them money “or some easing in the ratios,” Michael Tomalin, head of the National Bank of Abu Dhabi PJSC, said in an interview in Abu Dhabi yesterday. “Because banks are tight for liquidity, there is quite a bidding war for deposits,” and “this is keeping interest rates higher than they should be.”

Banks in the U.A.E. have faced a shortage of funds as the global credit crisis shut access to foreign borrowings and investors speculating on a currency revaluation withdrew money from local banks. The gap between commercial bank loans and deposits in the U.A.E. rose to 110 billion dirhams ($30 billion) in March, before falling to 91 billion dirhams, central bank governor Sultan Bin Nasser al-Suwaidi said on May 7.