The Central Bank of the United Arab Emirates may step in and guarantee the $59 billion in debt of Dubai World, the investment arm of Dubai, media reports said on Saturday. The report, citing persons familiar with the matter, said the measure would allow local UAE banks exposed to Dubai World to avoid taking provisions. Dubai World's largest creditors are domestic banks in Dubai and Abu Dhabi. Earlier this week, Dubai requested that Dubai World be allowed to skip six months of interest payments. Reports said the central bank is trying to ensure that Dubai's economy does not suffer any damage amidst global concerns about the emirate's ability to repay it debt. Earlier in the week, Dubai requested that Dubai World be allowed to skip six months of interest payments. Reports also said that Arab central bankers want a global “early warning system” for financial institutions. Central bankers and the heads of monetary agencies from 22 Arab states will meet to discuss the creation of the warning system. The meeting comes as Arab states battle the economic crisis and follows a summit that thrust the G20 group of countries, which includes Saudi Arabia, to lead global economic coordination. Reports added that UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi said the next phase requires closer cooperation between central banks and monetary institutions. As the G20 did, Arab central bankers are expected to discuss measures to tighten regulations in the financial sector to prevent conglomerates from leaving regional and international banks with billions of dollars in potential losses. Also, the UAE's central bank governor said he expected commercial banks' third and fourth quarter financial results to be lower due to the provisions as well as the global crisis.
