DUBAI, Feb 5 (Reuters) - Banks in the United Arab Emirates will this year aim to repay capital placed with them at the height of the global financial crisis, with some turning to the bond market to avoid servicing expensive debt and risking a sudden 'capital cliff' later on.
The country's Ministry of Finance placed 70 billion dirhams ($19.1 billion) with banks to shore up their balance sheets after the collapse of Lehman Brothers in September 2008 triggered a seizure of the world's financial system.
But this support, which was converted into seven-year capital-boosting bonds in late 2009, was priced at a higher interest rate than the banks would pay if they borrowed money in today's market.
For example, National Bank of Abu Dhabi , the UAE's largest lender by market value, has a $750 million bond maturing in March 2017 that was trading on Tuesday at a yield of 2.36 percent - less than half the price it will pay this year on the 3 billion dirhams of government bonds it still has outstanding.
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