sultan bin nasser al - suwaidi : the global financial crisis and issues for a regulatory response welcoming remarks by h e sultan bin nasser al - suwaidi, governor of the central bank of the united arab emirates, at the high - level meeting on “ regulatory & supervisory policies in light of the recent financial crisis ”, organised by the financial stability institute & arab monetary fund, abu dhabi, 16 november 2009. * * * good morning, excellencies ladies & gentlemen y. e. josef tosovsky, y. e. dr. jassim al mannai, it gives me great pleasure to welcome you to the uae, especially those who traveled a long way to be here with us at the outset of this important high level meeting, and i would mention in particular the honorable thomas hoeing, president of the federal reserve bank of kansas city, and the distinguished speakers. excellencies ladies & gentlemen in this short speech, i will describe briefly the financial package the uae had to make available to banks, to help the banking sector stand in the face of the global financial crisis last year and issues being considered now for a regulatory response. the financial packages a ) central bank of the uae ’ s package central bank made available to banks in the uae certain facilities to help them with shortages of liquidity, its first such facility was made towards the end of september 2008, i will summarize as follows : 1 ) an overdraft facility : an aed 50 billion o / d facility was made available to banks through their current accounts at the central bank. 2 ) cd swap facility : banks were allowed to use 100 % of their central bank cd holdings to borrow dirham and dollar funds from the central bank. 3 ) discounting of government bonds : banks were allowed to borrow against their holdings of bonds and sukuks issued by local governments or local governments ’ companies, with a reasonable hair - cut. 4 ) swap operations ( dirham / us dollar ) : this facility was provided to all banks regardless of their dirham net position. 5 ) support to local governments : central bank discounted, in march 2009, us $ 10 billion of bonds issued by dubai government. b ) uae federal government ’ s package 1 ) federal government guarantee of bank deposits : in october 2008, the cabinet announced that the government will guarantee all deposits at banks licensed and operating in the uae, for 3 years. a plan has been initiated to create a guarantee scheme. 2 ) liquidity

decision - making ; they become unconsciously too optimistic in assessing risks, and firms and households as well as financial institutions may overextend themselves, resulting in a long - run misallocation of resources and significant swings in the economy. it seems that the recent economic slowdown as well as increased future uncertainty has reduced the risk that firms and households will overextend themselves. however, if the dense fog surrounding the outlook for the global economy gradually clears and as a result firms and households come to expect higher economic growth than previously, the current degree of monetary policy accommodation is likely to become overly strong relative to the level of economic activity. c. conduct of monetary policy in the near term next, i would like to talk about the bank's conduct of monetary policy in the near term based on the outlook i have just described for economic activity and prices. six months ago, the bank indicated in its october 2007 outlook report that it would " adjust the level of interest rates gradually in accordance with improvements in the economic and price situation. " in the april 2008 outlook report, however, the bank stated, " given the current situation where the outlook for economic activity and prices is highly uncertain, it is not appropriate to predetermine the direction of future monetary policy. " needless to say, the bank should, as a central bank, keep in mind that real short - term interest rates are currently at around 0 percent, an extremely low level. once the bank thinks that japan's economy is highly likely to follow a path of sustainable growth with price stability, it will be appropriate to adjust the level of interest rates. at present, however, the situation of japan's economy demands that most attention be focused on the downside risks. since the outlook for an economy always entails uncertainty, monetary policy decisions should be made not only based on the most likely projection but also fully taking into account factors that are risks to it. the bank considers that currently the risks are unbalanced, and in conducting monetary policy more attention needs to be paid to downside risks to the economy stemming from uncertainties regarding future developments in overseas economies and global financial markets as well as the effects of high energy and materials prices. the bank will pay close attention to future developments in economic activity and prices and, in particular, to whether downside risks will decrease, thereby increasing the likelihood of the economy realizing sustainable growth with price stability, or whether the probability of such risks materializing will rise. so far