The United Arab Emirates central bank said on Wednesday it would strive to help banks meet liquidity needs by offering UAE dirham-US dollar swap facilities, its latest effort to address a global credit crisis. The central bank said it would buy US dollars against the dirham spot and sell dollars against the dirham in a forward contract, at the same time, with the aim of “providing further services to the banking system”. “These facilities shall be provided to all banks operating in the UAE, regardless of whether or not they have a shortfall in their dirham net positions,” the central bank said in a statement after a board meeting. Swaps would be available for time periods of one week, one month, two months, three months, six months, nine months and 12 months, the central bank said. It gave no further details. “This is a mechanism to arrange dirhams and or dollar funding for banks at any time they need. They don't have to go out of the country,” an Abu Dhabi-based treasury manager, who declined to be identified, said of the swap facility. The UAE central bank and finance ministry have together launched AED120 billion ($32.67 billion) of emergency funding since September to help banks cope with tight credit conditions. Despite these efforts, the three-month Emirates Interbank Offered Rate has held around 4.4 percent. New lending in the UAE has lost steam in the last five months as banks become more prudent because they face higher borrowing costs and the prospect that some customers may default on real estate loans amid a housing market correction in Dubai. Credit growth in the second-largest Arab economy would slow to no more than 10 percent next year, after soaring more than 50 percent in the year to June, the central bank governor said earlier this month. Sultan Nasser Al-Suweidi added the world's fifth-largest oil exporter would take steps to ring-fence its banking system. Banks were in the process of repaying foreign debts and replacing them with “more manageable” local liabilities, he had said. Double tax accord In Berlin, Germany and the United Arab Emirates (UAE) ended a long struggle over the corporate tax arrangements between the two nations with the finance ministry in Berlin announcing Tuesday that they had reached an agreement on a new double taxation treaty. The agreement has implications not only for German companies operating in the oil-rich Gulf state, but in particular it concerns the tax treatment of UAE investors in Germany, notably the role of state-backed sovereign wealth funds in companies in Europe's biggest economy. Indeed, a major issue in hammering out the new tax accord revolved around the taxation of dividends. This included the tax status in Germany of the UAE's giant sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA). With assets totaling about 500 billion euros ($698 billion), the ADIA is the world's biggest state fund and has stakes in key German companies including leading carmaker Daimler AG and the country's biggest bank, Deutsche Bank AG. But under the agreement announced Tuesday, the ADIA will not enjoy any special tax privileges in Germany.
