sultan bin nasser al - suwaidi : review of the uae economy and the central banka€™s performance in 2006 speech by his excellency sultan bin nasser al - suwaidi, governor of the central bank of the united arab emirates, at the bankers lunch, hosted by the bank of new york, abu dhabi, 17 december 2006. * * * excellencies, his excellency sulaiman al mazroui ladies & gentlemen, it is a great pleasure indeed to join you today, especially at this magnificent resort, thanks to our host ; " bank of new york ". i would also thank mr. sulaiman al mazroui for the kind invitation and would try to be in line with the request in his letter, i e. to talk about banks'expected performance in 2006 and talk briefly about the uae economy. therefore, i will focus my short speech on the following subjects : 1. expected bank's performance in 2006 2. the uae economy and the exchange rate policy of the uae 3. central bank's issues and projects 1. expected bank's performance in 2006 this may be seen through four consolidated variables, comparing their figures as at 31st oct. 2006 with the figures of 31st dec 2005, we will arrive at some important conclusions, these are : 1. total deposits total deposits went up by 16. 3 % so far, from aed 426. 5 bil. 2. total advances total advances went up by 29. 2 %, from aed 379 bil. 3. total assets total assets went up by 25. 1 %, from aed 624. 9 bil., and 4. total profits total profits went down slightly, by - 0. 5 % compared to aed 14. 8 bil for the same period in 2005. this could mean that we will see a further decline by 31st dec. 2006. these figures suggest that " total advances " having grown at 29. 2 %, deserve further analysis. if we consider loan categories to residents, the following categories witnessed high rate of growth, as at 30th sept. 2006 : - real estate mortgage loans - grew at 58. 2 % and stood at aed 27. 7 bil. - services - grew at 69. 4 % and stood at aed 53. 8 bil. - transport & storage - grew at 67. 7 % and stood at 17. 9 bil. - financial institutions ( excluding banks

european banking system, we move a big step forward. although such a banking system is a necessary condition for sustainable credit growth, it is not the only condition for banks to increase lending to the real economy. at the national level, structural reforms are required that will help firms to regain competitiveness and become sound enough for banks to lend to them. banks take credit risk when lending to the real economy. they need to be convinced that their customers, such as small and medium - sized enterprises, will make enough profits to repay the loans they receive. the growth prospects for national gdp as well as economic and structural factors such as labour market rules and sound fiscal budgets are therefore relevant criteria for banks ’ decision to do business. the ecb will, from now on, have two missions : steering monetary policy and supervising banks. how will a conflict of interests be avoided? monetary and banking supervisory policies can have the same or contradicting objectives. both policy areas, for example, have a strong interest in a sound banking system. nevertheless, there may be future conflicts of interest, and in order to deal correctly with potential conflicts, we strictly follow the separation principle. decision - making related to monetary policy is kept strictly separated from decision - making related to our supervisory tasks, right up to the level of the governing council, which will have the decision - making power in both areas. additionally, the governing council will only be able to object to a draft decision proposed by the supervisory board. this new board is the one steering and influencing supervisory policies and decisions. bis central bankers ’ speeches supervision is starting, whereas the second pillar of the banking union, namely the rules applicable in case of risk of bank failure, is not yet ready. is this not dangerous for the ecb? the single resolution mechanism will be a major step forward in managing the restructuring or resolution of a distressed institution at the european level. and it is true that it will be operational only from january 2016 onwards. but this will not pose a great risk to the ecb as transitional procedures are in place. as of january 2015, all member states need to have a national resolution authority : they will be our counterparts if a bank finds itself in difficulty. similarly, the “ bail - in ” rules will already be partly applied as of january 2015. these rules establish that it will be the shareholders and investors who will bear, in the first instance, the losses of a bank. in 2016 additional rules will come into force, protecting member states and taxpayers