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UAE central bank cuts rate on liquidity support facilities to spur lending
Source: BI-ME and agencies , Author: BI-ME staff
Posted: Mon August 31, 2009 8:02 pm
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UAE. The UAE central bank said Monday the interest rate on the liquidity support facilities to banks shall be reduced from 2.5% to 1.5% effective from 1 September in an attempt to to boost liquidity and spur lending.

'This measure would basically reduce the cost of economic activities in the UAE, particularly investment spending, and would contribute to sustained growth and support the national economy in general,' the central bank said in a statement. 

The rate cut on the facility was introduced last year and  allows banks to deposit securities with the central bank in exchange for liquidity.

A treasury official said the rate cut referred to a facility launched in 2008, by which banks could deposit securities with the central bank in exchange for liquidity, and which was similar to its discount rate.

'The maximum duration of this facility is three months, but is renewable,' Mohamed al-Tamimi, assistant executive director of the central bank's treasury department, told Reuters

The central bank said it would lend against discounted 'first class securities.'

Bankers said Monday's rate cut was just another part of the central bank's efforts to bring down the Emirates interbank offered rate (EIBOR).

 

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