Official EIBOR rates might be issued by UAE bank

The United Arab Emirates Central Bank is going in for an official interbank rate for the dirham, which would reflect the market conditions in a better way.

This Emirates Interbank Offered Rate (EIBOR) would be established by the Central Bank after getting the rates from other banks directly instead of getting it from the third party.

This has been necessitated as the interbank offered rates in the UAE are more than the other banks in the region, Saudi Arabia in particular. Three month interbank rate in UAE was 2.45 percent on Tuesday.

The central bank insisted that the interbank rates represent the market conditions and held discussions with the concerned banks.

Rates analyst, Delphine Arrighi, of Standard Chartered, said: “Current interbank rates don't reflect market conditions but reflect that those banks remain constrained by high loan to deposit ratios. The market would need more transparency in the fixing of the interbank rate. Further clarification from the central bank might be needed to gauge the real impact on the interbank rate.”

At present rates are obtained from 10 local and foreign banks, namely - Abu Dhabi Bank Commercial Bank, ABN Amro, Citibank, Commercial Bank of Dubai, Emirates Bank, HSBC Bank, Lloyds TSB Bank, National Bank of Abu Dhabi, National Bank of Dubai, and Standard Chartered Bank. After ignoring the highest and the lowest rates, the average of the rates of eight banks is calculated.

The Head of Treasury of one of the Abu Dhabi-based banks said: “I think these rates are better determined by the market. The central bank agrees with that but is putting in a more robust framework.”