The UAE banks face no liquidity problems, market watchers said yesterday.

"The banks in the UAE are very well funded right now. None of the banks are taking this [the central bank's new emergency liquidity] facility, none of them I would think are even looking to take this facility. It is very, very expensive," said a senior bank official.

Another official said the UAE, the Arab World's second-largest economy, has not experienced any large outflows of funds.

The central bank has said the UAE banking system is more sound and liquid than a year ago, when the global financial crisis ended the oil and real estate fuelled boom in Gulf, the world's top oil producing region.

The UAE banks can use the central bank's new emergency liquidity facility until the end of March, but its size and drawing limits remain unclear, said the officials.

The central bank opened the new liquidity window for banks last month.

"The facility is renewable for the period of one week from now until the end of March," said one official.

The central bank said yesterday banks wishing to use the special additional liquidity facility may contact treasury for further direction, but did not publish details.

Central bank officials were not immediately available for comment.

The facility offered at 50 basis points above three-month Emirates interbank offered rates is available to all UAE banks and branches of foreign banks operating in the country and it is linked to banks' current accounts at the central bank.

"It is based on whatever limits the central bank has for individual banks, which we are not aware of," said a banker. "As of now we do not know how much money they can give us under this facility, we do not even know the overall facility size."

Any bank using the facility can swap funds from dirhams to dollars at par at any point in time with the central bank, the banking officials said.

The three-month interbank offered rate was fixed at 1.89 per cent yesterday, its lowest level since 2008, as funds are available in the market.

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