The UAE's central bank will keep looking at how to reduce the emirate's interbank offered rates and plans to meet commercial banks on a regular basis, bankers said.

The central bank said last month that EIBOR rates, based on quotes provided by a dozen banks, did not reflect true market lending rates, and it wanted to consult the banks on how to bring them down, according to a report in our sister newspaper Gulf Daily News.

Three banking sources said the central bank urged commercial banks at a meeting yesterday to lower the rates but was knocked back.

'They just asked banks 'will you bring the rates down?' And we said no,' said one banker who attended the meeting. 'It is the market that determines the rates, we said.'

Central bank officials were not available to comment.

Short-term rates edged down from nearly five-month highs after Dubai gave details of an offer for debt restructuring of its flagship company last week.

But bankers said there was no change in the market situation as banks kept chasing deposits they needed for longer-term funding, with offshore credit hard to access.

'Nothing new came out of the meeting, everyone's going round and round in circles and the same discussion,' said another banker.

'The situation has not changed nor the central bank's position on EIBOR. Given the situation and with no change in banks' positions, rates are obviously going to edge up.'

The overnight rate was fixed at 0.60 per cent yesterday, down from 0.63 a week ago. The benchmark UAE one-month rate was little changed at 1.78, while the Saudi benchmark was at 0.32.

Treasurers at UAE-based banks said there was still a reluctance to lend funds for more than a month. Lenders do not want to have their funds locked up for longer because of concern about exposure to debt-laden Dubai World.

'There is a shortfall of liquidity. People are being very cautious as there is little detail about Dubai (restructuring offer),' an Abu Dhabi-based banker said, adding no schedule was given with regard to planned meetings with commercial banks.

Dubai has outlined a $9.5 billion rescue plan for Dubai World. The proposal, which offers lenders their money back in five-eight years and promises to repay two key bonds in full, has been welcomed by markets.

UAE banks have booked provisions for their exposure to Dubai World and related entities and more provisions remain possible.