UAE Backs Dubai Banks

The UAE got behind domestic and foreign banks in troubled Dubai today, with its central bank setting up a "liquidity facility" on the eve before battered global markets were to re-open after a holiday break. The move was widely seen as countering the perception that Dubai might be the first global domino to fall, with the bank stressing that the UAE's banking system is "more sound and liquid than a year ago."

“Dubai could be the beginning of a series of sovereign debt issues or crises,” one trader tells the New York Times. “What Dubai is going to do is make people think more intensely about the lagging implications of last year’s crisis. It’s going to be a wake-up call to the people who thought that the financial crisis was just a flesh wound.” (More Dubai World stories.)