Roads were shut and stern warnings were issued as the country experienced extreme weather conditions
Mubarak Rashid Al Mansouri told a financial conference that US and European banks were continuing to scale back their relationships with Gulf banks because foreign regulators were requiring them to do more due diligence on customers, raising costs for the foreign institutions.
"One large US bank had de-risking issues in the region in order to comply with tighter risk controls. As the US dollar remains the dominant international currency, other US banks are following suit," Mansouri said.
"This could leave banks in the region without any US correspondent banking relationships, forcing them to clear their US dollar trade through central banks." Such an arrangement would increase risks because it would add one more party to the payment process and it would put an "unreasonable burden" on the Gulf's central banks, Mansouri said.
Senior monetary officials in the Gulf have been publicly complaining for a year about the reluctance of international, particularly US, banks to deal with some of their Arab counterparts, and Mansouri's remarks suggested the situation remained serious.
A study by the Arab Monetary Fund, published in September, found foreign banks were shying away for various reasons, including concern about violating economic sanctions, the risk of unwittingly being implicated in money laundering and financing of terrorism, and a broadly shrinking appetite for risk.
Al Mansouri said the Gulf was already complying well with rules against money laundering and terrorist financing, and that UAE authorities were in touch with US authorities and banks to convince them of this.
He said the central bank was also working with the UAE association of banks to assess the level of compliance further, particularly for smaller banks.
Meanwhile, the central bank is scrutinising money exchange houses and may take some houses' licences away if they don't comply with rules, Al Mansouri added.
The UAE central bank revoked the licences of two money exchange companies in 2013 and another one this year.
Higher growth
Al Mansouri said that he expected economic growth to edge up to about 2.4 per cent next year from an estimated 2.2 per cent this year, helped by oil prices at higher levels than they were for much of this year.
Speaking to reporters on the sidelines of an economic conference, the governor said he hoped for bank lending growth in the mid- to high single digits next year, similar to this year's growth.
Gross loans and advances in the banking system rose 5.9 per cent from a year earlier in September, according to the latest central bank data.
Asked about the rise of UAE money market rates to four-year highs, the result of tightening liquidity due to low oil prices, Mansouri noted money rates were rising elsewhere in the world and that UAE banks were continuing to fulfill their corporate lending function.
He also said the central bank had lending facilities which banks could use if they needed liquidity. - Reuters
Roads were shut and stern warnings were issued as the country experienced extreme weather conditions
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