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After the creation of the United Arab Emirates in 1971, a ‘Currency Board’ was established in May 1973, as per Union Law No. (2) of 1973. The Currency Board was mandated to issue the national currency that replaced the Bahraini Dinar and the Qatari and Dubai Riyal currencies in use at the time.
The UAE Dirham went into circulation in May 1973. Within weeks, other currencies in use were replaced by the UAE Dirham, at the rate of one UAE Dirham to a Qatari/Dubai Riyal and ten UAE Dirhams to a Bahraini Dinar.
The Currency Board's functions were limited to issuing the UAE Dirham and ensuring its full coverage in gold and foreign currencies. The value of the UAE Dirham in gold stood at 0.186621 grams and it was pegged to the US Dollar at a rate of 3.94737 to a dollar, within a narrow margin.
Despite its limited mandate, the Currency Board was instrumental in ensuring the efficient organizationand soundness of the banking sector.With technical support from the International Monetary Fund, the Currency Board prepared collected and classified detailed monetary and banking statistics. The Currency Board also issued annual reports and bi-annual economic bulletins.
On 10 December 1980, “Union Law No. (10) of 1980 Concerning The Central Bank , The Monetary System And Organization of Banking” was issued, creating the Central Bank of the UAE and providing the Central Bank with authority over the organisation of the monetary and banking systems in the UAE. This includes the organization of monetary, credit and banking policy in the UAE and the supervision of its implementation.The Central Bank's mandate includes : (1) issuing of the currency, as per the provisions of the said law; (2) stability of the currency as well as its free convertibility into foreign currencies; (3) credit policy to achieve balanced growth of the national economy; (4) organization and development of banking as well as monitoring of the efficiency of the banking system; (5) function as the Bank of the Government; (6) offering monetary and financial advice to the Government; (7) maintaining government reserves in gold and other currencies; (8) acting as ‘bank of banks’ operating in the country; and (9) acting as the financial agent of Government at the International Monetary Fund and the World Bank and other international and regional financial institutions. The Central Bank is also authorized to handle all State transactions with such parties.
Since the creation of the Central Bank, the banking sector evolved in response to the needs of the expanding economy. At the end of the year 1980, M0 reached AED 2.4 billion while M1 stood at AED 7.4 billion, M2 at AED 23.6 billion and M3 at AED 33.0 billion. By the end of 1990, M0 more than doubled to reach AED 4.9 billion, while M1 reached AED 10.8 billion, M2 reached AED 58.1 billion and M3 reached AED 73.2 billion. At the end of 2000, M0 stood at AED 12.2 billion while M1 stood at AED 34.1 billion, M2 at AED 141.5 billion, and M3 at AED 184.0 billion. At the end of 2010, M0 reached AED 47.8 billion, M1 at AED 233.0 billion, M2 at AED 786.4 billion, and M3 reached AED 985.2 billion.
Total bank lending increased from AED 21.2 billion at the end of 1980 to reach AED 43.4 billion at the end of 1990, AED 155.2 billion at the end of 2000, and to AED 972.1 billion at the end of 2010.
Foreign assets of all banks operating in the UAE increased from AED 28.5 billion at the end of 1980 to AED 62.9 billion at the end of 1990, to AED 91.5 billion at the end of 2000, and to AED 233.5 billion at the end of 2010.
Total asset of banks operating in the UAE reached AED 30.9 billion at the end of 1980, AED 129.7 billion at the end of 1990, AED 277.1 billion at the end of 2000, and AED 1609.3 billion at the end of 2010.
As regards the Central Bank, its total assets stood at AED 9.80 billion at the end of 1980,AED 17.3 billion at the end of 1990, AED 50.1 billion at the end of 2000, and AED 228.9 billion at the end of 2010.
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