UAE cbank to look at steps to reduce interbank rates

United Arab Emirates interbank offered rates do not reflect true market lending rates and the central bank will consult with banks and make proposals on how to reduce them, a central bank official said on Monday.

The Emirates Interbank Offered Rates (EIBOR) have been edging up in recent weeks, touching six-month highs as some banks pushed them higher in competition for deposits.

"It (EIBOR) does not reflect true market rates, so this is going to be discussed thoroughly at our next meeting with commercial banks," Saif Hadef al-Shamsi, senior executive director at the central bank's treasury department, told Reuters.

"There are some demands from banks and the central bank will come up with some proposals at the next meeting on how to bring the rates down," he said on the sidelines of an event.

Shamsi said the meeting would take place soon but did not give details.

The benchmark UAE 3-month ratewas fixed at 2.17 per cent on Monday, up from 1.89 per cent a month ago, with rates ranging from as low as 1.20 per cent to 2.50 per cent. The Saudi benchmark was at 0.7675 per cent on Monday.

In September, the UAE central bank rejigged the panel of providers for the EIBOR and altered the formula used to calculate it, aiming to bring rates down and boost lending in the UAE hit by the global financial crisis.