This sounds like a bad idea.
The fundamenal business of commercial banks is borrowing short and lending long.
If customers suddenly want their deposits back or if interbank money gets hot, it can cause a world of trouble for an unprepared bank.
So a safety margin needs to be maintained.
Trusting bankers to do the sensible and prudent thing has been proven false so many times that it should be clear that regulations are required. On this issue and many others. And that many times the regulations will restrict business to prevent bankers from getting themselves into trouble.
What's even more at issue here is that in aggregate UAE banks are already over lent in comparison to core customer deposits.
Here's Kamco's report with some statistics.
Also note the very high compound annual growth rate in loan portfolios - a sign of credit distress to come. Another reason for prudence on this issue.
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2 comments:
Abu Arqala for president! (of the Fed)
The fed credit agency to be specific :-)
Too true, in a devoloping economy like this one, you can never have enough regulation.
Things like introducing short selling in a reccession need to be looked at long and hard before getting the go ahead.
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