Media ININ Economy We Trust
Media In – Abu Dhabi 17 October 2018 / WAM
/ The value of letters of guarantee issued by banks to their customers from institutions and companies operating in all economic sectors amounted to AED 12.2 billion during the first eight months of this year, which raised the total balance of this item to AED 96.8 billion at the end of last August, Central Emirates. The return of the banking system to the expansion of the issuance of letters of guarantee reflects the activity witnessed by non-oil economic sectors in the country since the beginning of this year, after the calm that prevailed in the previous phase due to the slowdown that included the economies of all countries of the world. According to the financial concepts, the letter of guarantee is a written obligation of payment, issued by the buyer’s bank “the importer” and is called the issuing bank while the future bank is called the seller’s bank. Under this letter, the issuing bank ensures that the buyer pays its own currency in respect of the seller in return for the seller supplying the goods agreed upon and under conditions agreed between the parties. The analysis of the activity of the banking system with the guarantee of institutions and individuals shows that in the first quarter of the year, the banks operating in the country issued letters of guarantee amounting to 1.7 billion dirhams. In the second quarter of the same year, the banks increased their activity in this area and the value of letters of guarantee issued to about 9.5 billion dirhams, raising the total balance of 95.8 billion dirhams. It is expected that the coming months will witness an expansion in the activity of banks in the issuance of bank guarantee letters, in line with the continuous growth of non-oil economic sectors.
