UAE has enough dollar assets to meet local demand

Banks in the United Arab Emirates had enough dollar liquidity to cover the needs of local banks and the exposure of the OPEC member's banks to the euro zone crisis was limited, a newspaper quoted a central bank official as saying on Tuesday.The UAE central bank's dollar assets were enough to fully cater to the needs of local banks "immediately", Saif Hadef al-Shamsi, senior executive director at the central bank's treasury department, told the Arabic newspaper Al-Ittihad."There is no problem on this side," he was quoted as saying. Shamsi also said the exposure of local banks to European banks was limited, adding banks operating in the country had risk management departments dealing with the risks of economic and banking developments and conditions in the world.Spanish press reported US President Barack Obama as saying the euro zone's leaders need to show markets they are taking responsibility for its debt crisis and work out how to tally monetary union with budget policy. European markets have taken a hammering from growing expectations of a Greek debt default, worries over French banks due to their holdings of debt and renewed rises in Italian bond yields. Shamsi said banks in the UAE should be careful in their deposits with foreign banks abroad, the paper wrote, saying "the local banks must have risk managements able to choose their partners in the global markets."In March, bank deposits in the world's No. 4 oil exporter had risen to their highest level in at least more than two years as depositors stored money in banks due to social unrest in the region.However, UAE banks still remain hesitant to lend following Dubai's debt woes and weakness in the property sector. Deposits in the OPEC member's banking system stood at AED1.113 trillion ($308bn) in July, from AED1.126 trillion in the previous month, central bank data showed. Shamsi also said the surplus liquidity of banks operating in the local market exceeded AED100bn, and that many of the monetary tools provided by the central bank to banks were not being used.UAE private sector credit growth was unchanged year-on-year at the end of May, after an only 0.2 percent year-on-year in April, central bank data showed. It showed annual growth rates of above 50 percent at the height of the oil and property boom in 2008. UAE interbank offered rates have been falling gradually to seven-year lows this year as liquidity increased and sentiment improved after last September's Dubai World $25bn debt restructuring.The benchmark UAE three-month interbank offered rate , based on quotes from dozen of banks, was set at 1.476 percent on Tuesday, holding near the lowest level since June 2004. But it is still well above the Saudi benchmark of 0.600 percent.