Deposit guarantee may stay longer

The UAE government is considering extending a three-year decision to guarantee bank deposits introduced just after the eruption of the 2008 global fiscal crisis to protect its financial system, an official has said.

The UAE, the second largest Arab economy with the biggest regional banking system, enforced the bank deposit guarantee system in October 2008, just a month after the global crisis jolted the economies and banks of most nations.

In a report on Sunday, a Dubai-based Arabic language daily said it asked finance ministry undersecretary Younus Khoury if there is any plan to extend that system once it is expired next month.

“The government committee entrusted with the bank deposit guarantee will meet to take the right decision on extending this mechanism in the light of the current situation,” Khoury was quoted as saying.

Al Bayan quoted unnamed bankers as saying they believe there is a need for an extension of that system for an indefinite period of time.

The UAE was among the first countries in the world to enforce deposit guarantee regulations as part of emergency measures to safeguard its banking sector. The measures also included injection of liquidity into the sector by the central bank and the ministry of finance to offset post-crisis shortages.

"We are determined to protect our financial and banking system out of keenness to preserve the interests of our country and people," His Highness Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai, said after a cabinet meeting that approved the bank deposit guarantee law in 2008.

The UAE has the largest Arab banking system in terms of assets, which stood at around Dh1,686 billion at the end of July. Deposits stood at Dh1,113.6 billion.

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