A United Arab Emirates (UAE) council that advises the country's rulers approved a law on Tuesday to allow the government to guarantee debt instruments issued by local banks in a bid to boost the bond market.

The law now needs the approval of the UAE president. 'This is a step forward. We want to create a bond market at the local and federal level,' Minister of State for Finance Ubaid Hamid al-Tayer told reporters.

The guarantees would apply only to new medium-term notes and bonds, not to old issues, Tayer said. Banks could issue the debt instruments in any currency denomination, he said.

This is the UAE government's latest measure to shore up its banking system since the global financial crisis hit the Gulf Arab region.

The central bank and finance ministry have together launched 120 billion dirhams ($32.68 billion) of emergency funding since September to help banks cope with tight credit conditions.

States and corporates in the Gulf Arab region, including Abu Dhabi, raised over $15 billion in bonds in the last four months and are eyeing more issues as spreads narrow and demand rises for high-rated emerging market debt.

The UAE's Federal National Council advises the government on legislation and questions cabinet ministers on issues in a parliament-like fashion in the UAE, which does not allow political parties or full popular representation.-Reuters