Dubai Bank nationalized to protect the UAE banking sector from a crash
Posted on 16 May 2011 with 2 comments from readers
The Dubai Bank has been taken over by the Dubai Government to protect depositors and the UAE banking sector from a crash.
This will result in another significant write-down for Emaar Properties which owns a 30 per cent stake. The balance is owned by Dubai Holdings in turn owned by the Ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum.
A statement from the Dubai Media office said the takeover was to ‘ensure that Dubai Bank’s business continues uninterrupted while options for the bank’s future, whether to be run on a stand-alone basis or be potentially merged with another bank in which the government has ownership are being assessed’, adding that the government had decided to ‘act swiftly’ to protect the interest of depositors.
Government stakes
Dubai Government owns stakes in Dubai Islamic Bank, Commercial Bank of Dubai, Noor Islamic Bank and Emirates NBD. Last year there were rumors of a possible three-way merger between Dubai Bank, Dubai Islamic Bank and Amlak.
UAE stocks tumbled to a five-week low on the unexpected news. Dubai has not seen a bank collapse since the mid-80s when another bank of the same name also failed, and Emirates International Bank was formed then from a hasty merger.
Bank collapses often follow real estate slumps like the one seen in Dubai almost three years ago, and many commentators have been surprised that something like this has not happened before. Banks in the US and UK from Citi to Northern Rock and RBS have been taken into public ownership in recent years to stave off a banking crash.
2 Comments posted by readers:
So Abu Dhabi retains the record for size of bank collapse within UAE, courtesy BCCI, nearly twenty years ago, but under entirely different circumstances!
the difference between bank colapses in other countries, that you mention, is just that: they were banks for the entire country. This is a bank collapse operating in one city!