Law For Govt Bond Guarantee passed by UAE Advisory Council
Tuesday saw the United Arab Emirates' Federal National Council, the consultative body advising the government, ratifying a law to permit the federation to guarantee bank bonds and medium term notes for five years.
It should be noted that in order to qualify for the guarantee, bonds eligible for the guarantee must be issued before Oct. 10, 2011. Furthermore, the banks must apply to the Ministry of Finance for approval. The expiry of the guarantees would be in five years from the date of issue.
Via this law, the banks could be enormously aided in the UAE to promote funds and boost the Gulf's second-largest Arab economy, since it is trying to avoid fallout from the global credit crunch.
While new issuances from local banks would be guaranteed by the law, the guarantee would not apply to old bonds.
Obaid Al Tayer, Minister of State for Financial Affairs said: "The value the government will be guaranteeing is another process that has not yet been defined. We will sit and discuss with each bank and review the value of these notes that they need to guarantee."
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