The central bank of the United Arab Emirates said on Sunday it is providing banks with extra liquidity, stressing its support to the banking sector after Dubai World asked to suspend debt payments.
The bank said in a statement it had issued a notice to UAE banks and foreign banks operating in the UAE "making available to them special additional liquidity facility linked to their accounts at the central bank."
The statement gave no indication of how much extra liquidity was being set aside for the banking system.
The central bank also said Sunday the country's banking sector was more sound and liquid than a year ago, days after Dubai asked to suspend debt payments.
"The UAE banking system is more sound and liquid than a year ago," the central bank said in a statement, pointing out that UAE banks have made fewer short-term borrowings from international lenders, with foreign interbank deposits and short-term bonds dropping by 25 percent.
A spokesman for the central bank said it was “monitoring developments to ensure there is no negative impact on the UAE economy”, according to one report.
Meanwhile, advisers to Dubai World are working on a plan to enable the troubled conglomerate to meet a crucial deadline for repayment of one of its most important debts – the US$4 billion (Dh14.6bn) that its subsidiary Nakheel is due to pay back in just over two weeks.
This is one of four options being considered.
If Dubai World were able to make that payment, it would create breathing space to deal with the rest of its liabilities – which currently add up to $59bn – and reassure world markets about Dubai’s financial condition.
Dubai World is refusing to sell off its assets cheaply, a senior company official said in a report Sunday.
"The group has categorically refused in recent months to sell several properties and investments at low prices," the official whose name was not revealed told Al-Ittihad, a state-run Abu Dhabi daily.
"The sale of these assets should be on a fair, commercial basis, allowing the group to achieve its strategic long-term (goals) away from cyclical economic pressures," the source was quoted as saying.
Among the conglomerate's key assets are the QE2 cruiseliner and the Turnberry golf course in Scotland.
Dubai, one of the UAE's seven city states, said Wednesday it intends to request a "standstill" for at least six months on the maturing debt of Dubai World, its largest and most-indebted state-run holding.
The source said a six-month moratorium would give the time needed to restructure the holding company under the supervision of a supreme committee charged with leading the emirate out of the crisis.
The restructuring would focus on "real estate and foreign investment units that are most affected by the global crisis, with the exception of DP World, which has posted good results."
Dubai World said at the time that this would result in 800 million dollars of savings during the next three years.
DP World, a leading global port operator, said in January it was reviewing its expansion plans and putting a freeze on hirings due to a slowdown caused by the global financial crisis.
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Bank Negara Indonesia said financial trouble at Dubai World will not affect its plan to invest Rp1 trillion in Dubai in a bid to expand the independence of its sharia unit next year.
