Foreign banks withdrew Dh20bn in the first quarter

Foreign banks repatriated nearly Dh20 billion from the UAE in the first quarter of this year after liquidity shortages at home and an end to speculation about a revaluation of the dirham against the US dollar, official figures show.

Deposits by foreign banks with the UAE's 24 national banks and 28 foreign units fell to Dh155.4bn at the end of March from nearly Dh175.6bn at the end of 2008, according to Central Bank figures.

The deposits had edged up to Dh178.3bn at the end of January before they dipped again to Dh170.9bn at the end of February.

They were as high as Dh205.6bn at the end of 2007, when speculation mounted over a possible decision by the UAE and other Gulf oil producers to revalue their currencies against the US dollar within the monetary union plans. Foreign banks began repatriating their funds, better known as hot money, in the second half of 2008 when the UAE made clear it has no intention to quit the dollar.

Such a policy was further backed by the UAE's decision early this year to quit the GCC monetary union and a fresh announcement by the Central Bank that there are no plans to end the dollar peg.

Lower deposits by foreign banks depressed the total foreign liabilities of UAE banks to Dh273.6bn at the end of March from Dh277.09bn at the end of February. They had risen to a record Dh320.9bn at the end of 2007.

Bankers said the withdrawal of those funds was also prompted by liquidity shortages that hit many global banks after the eruption of the financial crisis.

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