The United Arab Emirates central bank will use a new method to determine the Emirates Interbank Offered Rate from April, to bring more accuracy and transparency to the system, Reuters reported March 12, citing a senior banking industry official.
The new methodology was originally scheduled to launch in the week of Jan. 15, but it was delayed following several months during which a panel of banks that contribute to EIBOR submitted interest rate quotes using the existing system and the proposed one.
"We have taken benchmark banks to tell us what is the actual cost of deposit and the incremental cost of deposit that will become the interbank rate for the UAE," said Abdulaziz al-Ghurair, chairman of the UAE Banks Federation, according to the Reuters report.
A panel of around 8 banks will calculate the rates under the new method, which will be reviewed monthly, Ghurair said, adding that an external auditor will ensure transparency.
Banks in the UAE are still waiting for the central bank's guidance in terms of their preparations for the new value-added tax introduced at the start of 2018 in the previously tax-free zone. The central bank is expected to decide as early as April whether the tax should be paid directly by banks or passed on to customers, Ghurair said.
