A top commercial banker in the United Arab Emirates has urged the central bank to cut some of its reserve requirements sharply in order to spur corporate lending.
“What we are asking for now is to provide greater liquidity and release reserve funds…which the banks can use,” Abdul Aziz Al Ghurair, chief executive of Mashreq bank, was quoted by a newspaper as saying.
Al Ghurair suggested cash reserve requirements imposed by the central bank on banks’ current accounts be slashed to just 1 percent from 14 percent to free more funds for lending. Reserve requirements for time deposits are already at that level.
The banker, who also chairs the Emirates Banks Association and the Dubai International Financial Centre Authority, the governing body of Dubai’s offshore financial district, said this would provide the banking sector with additional liquidity of up to 20 billion dirhams ($5.5 billion).
Analysts said the central bank was unlikely to agree to any cut in reserve requirements for the foreseeable future, particularly since the existing amount of funds in the banking system seemed ample. Al Ghurair himself said there were 268 billion dirhams worth of liquidity looking for lending opportunities in the UAE at the end of 2011, Reuters reported.
