FNC permits legislation guaranteeing bank-issued bonds, Islamic sukuk

The proposed law stipulates that the government has the right to reject backing of certain issuances without offering any reasons

Federal National Council (FNC) okays a legislation to allow the Ministry of Finance (MoF) to guarantee bank-issued bonds, medium-term notes, and Islamic sukuk. The legislation would permit public and private sector banks operating in the UAE to apply to the MoF for its backing of bonds issued until October 11, 2011.

The law stipulates a maximum five-year duration of the financial instruments to be covered and gives the government wide powers in the approval process.

The proposed law stipulates that the government has the right to reject backing of certain issuances without offering any reasons. The legislation seems aimed at strengthening the country's budding bond market by shoring up investor confidence in issuances by the private sector.