The United Arab Emirates needs to find new liquidity tools to ensure its banks will be able to implement new global rules under the Basel III accord, the UAE's central bank governor Sultan Nasser Al-Suweidi said Monday. Suweidi was speaking at a financial forum in Kuwait. Although UAE banks have high capital levels — their average Tier 1 capital ratio is about 11 percent - liquidity rules are expected to be more of a challenge for them, as they prepare to meet the Basel III banking standards that will take effect around the world over several years from 2013. One reason is that Gulf debt markets are not as deep or varied as developed markets, meaning banks have a limited choice of liquid instruments that they can use locally. Basel III will require banks to hold enough cash-like instruments to withstand a month of severe fund outflows. The UAE will see a slowdown in business because of global economic conditions, Suweidi said. "We will see a slowdown of business due to an expected economic downturn (globally), due to effects of the European crisis and the situation in the US as well," he told Reuters at a financial forum in Kuwait. "There will be an effect on China. China is the main economy to affect the supply of oil…so there will be impact on local economies of the GCC (Gulf Cooperation Council)." However, Suweidi added that China was growing at a very reasonable speed, so he was not very concerned about a severe slowdown there. The central bank governor also said he was happy with the UAE's current monetary policy rate of 1 percent. He reiterated that UAE banks' exposure to sovereign and private sector debt in Europe was "really small". Meanwhile, Dubai's benchmark stock index led United Arab Emirates shares lower Monday amid speculation Sunday's gain was overdone and after Abu Dhabi-based Aldar Properties PJSC announced job cuts. Arabtec Holding Co. fell the most in almost two weeks after posting earnings. Aldar, Abu Dhabi's largest real-estate developer by market value, lost 0.9 percent. The benchmark DFM General Index dropped 0.6 percent, the most since Oct. 18, to 1,408.06 at close. The measure surged 2.6 percent Sunday, bringing its three-day advance to 4.6 percent. It has lost 1.7 percent this month. Abu Dhabi's benchmark ADX General Index declined for the first time in six days, losing 0.3 percent and bringing its drop for the month to 1.3 percent. “The drop is a mix of profit-taking and the correlation to international markets,” said Tariq Qaqish, deputy head of asset management at Dubai
