Sultan Bin Nasser Al Suwaidi, UAE central bank governor. (Getty)
The UAE’s central bank governor Sultan Bin Nasser Al Suwaidi has called for an urgent move towards the creation of a local debt market.
Speaking at the Global Financial Markets Forum in Abu Dhabi, UAE, Al Suwaidi said that a well developed local debt market would buffer the country from the next global economic crisis.
“Countries that have a developed domestic bond market did better (in the crisis) than those with an underdeveloped bond market. A domestic bond market is essential,” he said.
The banker, who is widely credited with steering Dubai out of the recession with a series of recapitalisation initiatives, said that 2008 saw a “massive” outflow of capital and liquidity was in short supply.
“We provided liquidity to the smaller banks, but normally thin liquidity would lead to a shrinking of trade volumes and business. Establishing a domestic market will help to mitigate the negative impact of a crisis,” Al Suwaidi said.
“The new Basel III rules will require higher liquidity within banks, and it’s better for banks to borrow from local banks so they are not exposed internationally.”
The banker said that a domestic bond market would allow the government to issue treasury bills and create a yield curve in dirhams.
He added that a domestic debt market would allow government related enterprises (GREs) to finance themselves with bonds and sukuks rather than bank loans.
A domestic debt market must be anchored in transparency, he said.
Tony Douglas, CEO, Abu Dhabi Ports Company, and Carl Sheldon, CEO of Abu Dhabi energy firm TAQA, who were also speaking at the Global Financial Markets Forum, said that they would strongly welcome a local debt market.