"United Arab Emirates banks are holding the most liquid assets in more than three years as government deposits surge and companies increasingly rely on the bond market for funding.
The combined loans-to-deposits ratio of the 51 banks operating in the second-biggest Arab economy fell to 90.4 percent in April, the lowest since at least March 2010 when it was 105.7 percent and Bloomberg began collecting the data. Increased liquidity has helped reduce the three-month interest rate by 38 basis points, to below the level of neighboring Saudi Arabia, the largest Arab economy, central bank data show.
Swelling liquidity at U.A.E. banks reflects a gradual recovery of the industry from the impact of the global credit crisis and contrasts with 2008, when the emirates government pledged $33 billion to ease funding after credit markets froze. Abundant cash at banks amid low interest rates may place them under pressure to boost lending or face a decline in profit margins, according Shabbir Malik, an analyst at EFG-Hermes Holding SAE in Dubai."
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