Investment bankers from London were flying into once-booming Dubai last night as the bailout of the Gulf state's banking sector began.

Goldman Sachs, UBS, Morgan Stanley and Credit Suisse have been among the banks speaking to the governments of Dubai and Abu Dhabi, the richest state in the United Arab Emirates, about the restructuring of Dubai's financial services sector.

On Sunday the ruling council of the UAE said that it would inject capital into Emirates Development Bank, a new vehicle that will buy up struggling lenders. Emirates rescued its first two banks yesterday as it absorbed the Islamic mortgage lenders Amlak and Tamweel Finance.

Goldman Sachs was already advising on a planned merger between Amlak and Tamweel Finance. A number of other banks are believed to be working informally on a banking sector bailout already, although Dubai and the UAE's federal government have yet to make an official appointment.

In a significant shift in policy, Dubai bowed to international pressure yesterday to reveal the level of its debt. This represented a significant cultural shift for Dubai and was designed to calm rattled regional lenders and global fears about the stability of the emirate, which has undergone exponential growth over the past few years but is seen as being heavily indebted.

Mohamed Alabbar, of Dubai's executive council and the chairman of Emaar Properties, said yesterday that the emirate's borrowings were $80 billion (£52 billion), including those of state-owned companies, equating to $40,000 per capita if split among Dubai's population of two million. Mr Alabbar insisted: “The Government can and will meet all its obligations going forward.”

Yet the emirate, which is home to the world's tallest building and a luxury mega-resort built on a man-made, palm-shaped island, did say that it would cap construction as its building boom turned sour.

His comments did not convince Dubai's stock market. Its leading index plunged to its lowest level since November 2004, with Mr Alabbar's Emaar Properties leading the way with a 9.5 per cent fall.

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