UAE central bank may guarantee Dubai World debt
Source: BI-ME , Author: BI-ME staff
Posted: Sun November 29, 2009 2:08 pm

UAE. The Central Bank of the UAE may step in and guarantee the US$59 billion in debt of Dubai World, according to a report in The National.

The report said the measure would allow local UAE banks exposed to Dubai World to avoid taking provisions. A federal guarantee, backed by Abu Dhabi will also protect banks from a possible rating downgrade.

Lenders in Abu Dhabi and Dubai hold billions of dollars of Dubai World debt and the company’s decision to ask for a payment holiday could hurt bank share prices when trading resumes tomorrow.

“The Central Bank is considering measures to limit the risk of systemic damage to the banking system,” an adviser to the Government told The National, adding that an announcement was expected tomorrow (Monday).

Members of the Dubai Government met Central Bank officials in Abu Dhabi yesterday to discuss the measures, the newspaper said without citing anyone.

The Central Bank is keen to avoid banks taking provisions for bad loans to Dubai World, which would negatively affect profitability as well as avoiding further downgrades of credit ratings of the banks, the report said.

A spokesman for the Central Bank said it was “monitoring developments to ensure there is no negative impact on the UAE economy”, reported Reuters.

The Central Bank is “closely watching events stemming from the Dubai debt crisis to ensure no harm results for the national economy”, a spokesman for the bank told the news provider on saturday.

"wait until the Central Bank opens on Monday for further news," the spokesman added .

Stock markets in Dubai and Abu Dhabi reopen on Monday after closing at the end of trading on Wednesday for the Eid al-Adha holiday.

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