Due to the increase in credit crisis, there was some serious tightening in the Interest rates in the UAE. Following this, the banks geared up for the possibility of having to rely upon emergency cash from the central bank.

There was a tremendous increase in the interbank lending rates, since banks struggled for short-term cash in order to cover compulsions. The UAE central bank, which extended a helping hand by lending an emergency fund of 50 billion UAE dirham ($13.6bn), is the only hope for the banks to rely upon as of now.

A treasurer at a major Dubai bank said that issue to be concentrated upon is short term liquidity. With the fear for a major dirham revaluation, already the investors have left the stocks and retained deposits.

The treasurer reported, “The liquidity shortage, which is global, is exacerbated in Dubai by the speculative flows in the currency being reversed so quickly.” 

There has been a steady increase in the one month rates which went up to 3.95625 per cent compared to 3.7625pc on Thursday. 

A senior treasury official of Abu Dhabi Commercial Bank, reported, “No, we have not drawn, and we will use the facility only if we need it. We have not felt the need yet. But that does not mean we will not use it in the future if we need it”.

During the last week, it was announced by the UAE central bank, that to ease in money markets, it will offer banks short-term funds through the 50bn-dirham facility in an emergency move. This step was initiated in order to ease the burden of global credit crunch.