Albawaba cited Mr Sultan Bin Nasser Al Suwaidi the UAE Central Bank Governor as saying during a financial forum in Kuwait that the UAE may witness an economic slowdown due to the global financial and economic crisis.

Mr Al Suwaidi stressed that the UAE banks’ exposure to sovereign and private sector debt in Europe was very small and voiced his happiness with the UAE’s current monetary policy rate of 1%.

He said that we will see a slowdown in business due to the global economic downturn, the European crisis and the situation in the US. There will be an effect on China. China is the main economy to effect the supply of oil so there will be an impact on the GCC economies.

Mr Al Suwaidi said that the UAE needs to find new liquidity tools to ensure its banks will be able to implement new global rules under the Basel III accord. UAE banks have high capital levels. Their average Tier 1 capital ratio is about 11%. 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, beginning in 2013.

He added that GCC, particularly UAE debt markets are not as deep or varied as developed markets, which means that banks have a limited choice of liquidity instruments that they can access locally.

(Sourced from www.albawaba.com)