Abu Dhabi’s First Gulf Bank (FGB) has secured a $1bn deposit from Dubai government-controlled Emirates Airlines as lenders in the UAE scramble to boost deposits before the year-end to meet the UAE Central Bank’s regulatory requirements.

FGB was among several UAE lenders who competed for Emirates’ deposit, according to two bankers familiar with the matter.

Lenders are trying to comply with the UAE Central Bank’s permissible limits in various ratios such as eligible liquid asset ratio, the advances to stable resources ratio and loan to deposit ratio. They have been pursuing short term corporate deposits between six months to one year maturity in order to boost their balance sheets, said the bankers and a senior official at an Abu Dhabi-based financial institution who was approached for placement of short-term deposit by several lenders.

“There is tension in the market and the banks in the last six-to-eight weeks have very aggressively pursued deposits,’’ according to one of the bankers who requested not to be named.

Emirates Airlines keeps nine months of working capital in cash for contingencies or fuel payments and it invites lenders from the UAE to offer interest rates for placing deposits with them, according to the banker. “What happens at Emirates is that there is effectively a bidding war. They highest bidder takes the deposit,’’ the banker explained.

Spokeswomen for FGB and Emirates Airlines declined to comment.

Liquidity conditions are getting tighter for the banks in the UAE. The price of crude, – sale of which is the major source of income for the oil-exporting UAE, especially, Abu Dhabi – have dropped to 11-year low in recent weeks. The government, in order to meet the shortfalls, has been withdrawing funds from the local banks, amplifying the liquidity crunch. Government deposits at National Bank of Abu Dhabi (NBAD) dropped by $13bn as the third-quarter profit fell by 3 per cent at the biggest bank in the UAE by assets.

The bank’s chief executive Alex Thursby in October said that the UAE banking system as a whole has lost about $15bn in government deposits from September 2014 to September 2015.

The overall deposit growth in the UAE has slowed down markedly in the last 12 months to just 2 per cent. The private sector deposits grew by 5.4 per cent while the government sector experienced a negative growth rate of 6.3 percent year-to-date in November, according to Monthly Outlook published on Central Bank’s website in December.

Loans, on the other hand, have risen by 8.1 per cent in the last 12 months by the end of November. The fastest growth was seen in government related loans, which rose 10 per cent year-to-date. However, this sector represents just 11 per cent of the total loans outstanding. The private sector accounted for almost 70 of the total loan volume, which grew by 8.3 per cent, according to the Central Bank.

“The UAE central bank has very strictly directed all the banks that they have to manage their loan to deposit ratios within the permissible levels, which is 1:1,’’ said the second banker who requested anonymity. “ The system’s loan to deposit ratio is around 104 so definitely some of the banks are in breach.’’

Those at risk of breaching the ratio either had the option of reducing assets or increasing their liabilities in a short span of time to meet the regulatory requirements. “Asset reduction is not that easy, hence there was a race for deposits,’’ the banker noted.

United Arab Bank (UAB), the Sharjah-based lender whose nine-month profit slipped 86 per cent due to additional provisioning, is among the UAE banks which pursued short-term deposits, according to the first banker.

Commercial Bank International (CBI) and Emirates Islamic were also active on that front, the banker said.

“As all banks, we actively seek client deposits. We are very comfortable with our liquidity position and ratios, which are in line with best market practices,” a CBI spokesman said.

Spokeswomen for both UAB and Emirates Islamic didn’t respond to phone calls and emailed requests for comments.