Bank bonds to be guaranteed



A law guaranteeing bonds issued by local banks was passed by the Federal National Council Tuesday in a move aimed at making fundraising easier for the nation's lenders. The law, which now awaits final approval from Sheikh Khalifa, the President of the UAE, is the third guarantee measure the Government has passed to ensure the stability of the country's banking system during the financial crisis. It follows earlier government initiatives aimed at backing local deposits and interbank loans. If signed into law, the bond guarantee would cover bonds issued before Oct 11, 2011, and would last for five years. "This kind of a federal guarantee sends a strong signal of confidence to the market," said Victor Lohle, the senior credit analyst at Standard Chartered. "On the surface it does look attractive and it shows a real commitment by the Government." Under the plan, the Ministry of Finance would evaluate whether to give government backing to bank-issued bonds on a case-by-case basis. Only newly issued medium-term notes and longer-dated bonds would be eligible, contrary to earlier reports that the law would also cover syndicated bank loans. "For each bank we will review the value of these notes they need to issue. Then we will determine the guarantee," said Obaid Humaid al Tayer, the Minister of State for Financial Affairs. The new law also allows the ministry to make decisions without giving detailed reasons for its actions. Local banks have faced growing difficulties in raising money through international bond markets since the global financial crisis hit. The value of new bonds and syndicated loans from UAE banks has fallen from more than US$10 billion (Dh36.73bn) in 2007 to under $800 million this year, according to a report from Standard Chartered. With the Government's backing, it is expected that banks will find raising money through bond issues easier and cheaper. A guarantee may also help banks refinance old debt that is maturing soon. Almost $3bn of bonds issued by banks and bank loans mature this year, while about $7bn come to maturity next year. The guarantee also aims to help start a thriving bond market in the UAE, an initiative that has recently become a priority for the Government. In April, Abu Dhabi issued $3bn in five-year and 10-year government bonds as part of a $10bn programme. Last month, the FNC passed legislation regulating the issuance of government bonds, which was seen as a key step towards establishing a local bond market. During the financial crisis, investors across the globe have grown reluctant to buy bank debt, including bonds. Without a steady stream of cash from bond sales, banks have found themselves with less money to lend. That has meant less financing for everything from major construction projects to consumer loans. "We feel that UAE banks must have additional liquidity," said Mohieddine Kronfol, the managing director at Algebra Capital in Dubai. "If they get that independently, that is good. If they need additional support, then that should be supplied." But there may be downsides. According to one analyst, who declined to be named, banks may not seek to have their bonds guaranteed because of the negative message it might send to potential investors. "Banks may be reluctant to send this kind of a signal to investors, that they need to rely on the government," the analyst said. afitch@thenational.ae uharnischfeger.ae

The five pillars of Islam

1. Fasting 

2. Prayer 

3. Hajj 

4. Shahada 

5. Zakat 

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

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Contracted list

Ashton Agar, Alex Carey, Pat Cummins, Aaron Finch, Peter Handscomb, Josh Hazlewood, Travis Head, Usman Khawaja, Nathan Lyon, Glenn Maxwell, Shaun Marsh, Mitchell Marsh, Tim Paine, Matt Renshaw, Jhye Richardson, Kane Richardson, Billy Stanlake, Mitchell Starc, Marcus Stoinis, Andrew Tye.

What is graphene?

Graphene is extracted from graphite and is made up of pure carbon.

It is 200 times more resistant than steel and five times lighter than aluminum.

It conducts electricity better than any other material at room temperature.

It is thought that graphene could boost the useful life of batteries by 10 per cent.

Graphene can also detect cancer cells in the early stages of the disease.

The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.

Our family matters legal consultant

Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

The specs

Engine: 1.5-litre turbo

Power: 181hp

Torque: 230Nm

Transmission: 6-speed automatic

Starting price: Dh79,000

On sale: Now

The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Power: 268bhp / 536bhp
Torque: 343Nm / 686Nm
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
On sale: Later this year
Our legal columnist

Name: Yousef Al Bahar

Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994

Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers

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The Penguin

Starring: Colin Farrell, Cristin Milioti, Rhenzy Feliz

Creator: Lauren LeFranc

Rating: 4/5

BUNDESLIGA FIXTURES

Friday Hertha Berlin v Union Berlin (11.30pm)

Saturday Freiburg v Borussia Monchengladbach, Eintracht Frankfurt v Borussia Dortmund, Cologne v Wolfsburg, Arminia Bielefeld v Mainz (6.30pm) Bayern Munich v RB Leipzig (9.30pm)

Sunday Werder Bremen v Stuttgart (6.30pm), Schalke v Bayer Leverkusen (9pm)

Monday Hoffenheim v Augsburg (11.30pm)

While you're here

Michael Young: Where is Lebanon headed?

Kareem Shaheen: I owe everything to Beirut

Raghida Dergham: We have to bounce back

Tailors and retailers miss out on back-to-school rush

Tailors and retailers across the city said it was an ominous start to what is usually a busy season for sales.
With many parents opting to continue home learning for their children, the usual rush to buy school uniforms was muted this year.
“So far we have taken about 70 to 80 orders for items like shirts and trousers,” said Vikram Attrai, manager at Stallion Bespoke Tailors in Dubai.
“Last year in the same period we had about 200 orders and lots of demand.
“We custom fit uniform pieces and use materials such as cotton, wool and cashmere.
“Depending on size, a white shirt with logo is priced at about Dh100 to Dh150 and shorts, trousers, skirts and dresses cost between Dh150 to Dh250 a piece.”

A spokesman for Threads, a uniform shop based in Times Square Centre Dubai, said customer footfall had slowed down dramatically over the past few months.

“Now parents have the option to keep children doing online learning they don’t need uniforms so it has quietened down.”

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The Buckingham Murders

Starring: Kareena Kapoor Khan, Ash Tandon, Prabhleen Sandhu

Director: Hansal Mehta

Rating: 4 / 5

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The specs

  Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now

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Financial considerations before buying a property

Buyers should try to pay as much in cash as possible for a property, limiting the mortgage value to as little as they can afford. This means they not only pay less in interest but their monthly costs are also reduced. Ideally, the monthly mortgage payment should not exceed 20 per cent of the purchaser’s total household income, says Carol Glynn, founder of Conscious Finance Coaching.

“If it’s a rental property, plan for the property to have periods when it does not have a tenant. Ensure you have enough cash set aside to pay the mortgage and other costs during these periods, ideally at least six months,” she says. 

Also, shop around for the best mortgage interest rate. Understand the terms and conditions, especially what happens after any introductory periods, Ms Glynn adds.

Using a good mortgage broker is worth the investment to obtain the best rate available for a buyer’s needs and circumstances. A good mortgage broker will help the buyer understand the terms and conditions of the mortgage and make the purchasing process efficient and easier. 

UAE currency: the story behind the money in your pockets