Abu Dhabi – Mubasher: The one-year Emirates Interbank Offered Rates (EIBOR) rose by 15 basis points over the past three days at the fastest pace in years.
The key one-year AED interest rate stood at 2.94% at the end of the prior week, compared to 2.7% last Monday, according to the EIBOR rates bulletin by the Central Bank of the UAE (CBUAE).
This hike, the main rate for the banking sector’s total credit in the UAE, came in line with the increase in the banks’ liquidity, which is adversely impacting the banking sectors’ indicators, Al-Ittihad newspaper reported.
Saeed Al Kaabi, CEO of ASCORP Holdings, said that the AED interest rate is associated with the US dollar rate.
The benchmarks of the banking sector are strong and provide banks with heavy liquidity, which proves that raising interest rate is not linked with the banks’ liquidity ratios or any local economic factors, Al Kaabi stressed.
The US dollar London interbank offered rate (LIBOR) rose by more than 57 basis points over the few past days to 2.67% at the end of the previous week, to come close to the EIBOR rate, which ranged between 2.7% and 2.79% over the last two weeks and increased to 2.94% last Thursday, he added.
Heavy liquidity
For his part, member of the National Advisory Board of Chartered Institute for Securities and Investments (CISI) Wadah Al-Taha said that the Emirati banking sector has high liquidity ratios and the banks have no reason to hike interest rates based on the local markets’ indicators.
The EIBOR will be set more realistically as of 15 April in accordance with a mechanism the CBUAE had announced recently, Al-Taha noted.
