General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
July 14, 2017

IMF published its staff report and selected issues report in the context of the 2017 Article IV consultation with United Arab Emirates (UAE). The introduction of Basel III capital adequacy standards in March 2017 by the Central Bank of the United Arab Emirates (CBU) is one of the key focus areas of the staff report.

The staff report discusses the ongoing initiatives to upgrade the supervisory and regulatory framework for the financial sector. The introduction and implementation of the Basel III capital and liquidity standards, risk management regulations, corporate governance standards, and new financial products and services are keys to strengthening financial resilience while addressing market development needs.The authorities did not expect that any bank would need to raise additional capital to satisfy the new capital surcharges for systemically important banks. Implementation of the Basel III liquidity standards published in 2015 is ongoing. The liquidity coverage ratio (LCR) is being applied to the three largest banks at 80%, which is set to rise to 100% by 2019. The CBU is planning to develop additional guidance to banks on the implementation of liquidity regulations and strengthen offsite and onsite monitoring of liquidity requirements. To support the CBU’s ongoing efforts, swift approval of the draft Central Bank and Banking Law is essential to enhance central bank independence, strengthen macro-prudential framework, and bolster safety nets. The authorities noted that the draft law reflects best international practices and is being discussed within ministries.


Although banks are adjusting to slower economic growth amid persistently lower oil prices, they remain sound and liquid, with stable and fully provisioned nonperforming loans. However, loans to related parties and concentration risks remain high in some cases. While asset quality at Islamic banks is slightly weaker than at conventional banks, both are adequately capitalized. The CBU’s recent stress tests showed that, except for a few small and medium-sized banks, most of the 21 local banks considered in the exercise would keep capital above the 12% regulatory minimum in an adverse scenario. Two medium-sized banks had stressed LCR slightly below 100%. The authorities noted that differentiated loan-to-value and debt-to-income ratios, along with the requirements for minimum financing for developers put in place after the global financial crisis, limit risk from exposures of banks to real estate. More active liquidity management, as the CBU intends, along with the development of debt markets would promote healthy liquidity and credit conditions. The recently introduced Basel III liquidity requirements are expected to incentivize banks to manage their liquidity more actively. To this end, the development of debt markets would provide banks with new dirham-denominated instruments.


The selected issues report describes the key features of the UAE banking system and financial markets and reviews the CBU framework for managing liquidity. It also proposes steps for moving toward more active management of liquidity. The report discusses the need to upgrade the CBU’s liquidity management framework, along with further steps to develop domestic money and debt markets. More active management of system-wide liquidity, as is already being planned by the CBU, and streamlining the gamut of the CBU’s liquidity management instruments would encourage banks to manage their own liquidity better and develop money markets. These efforts would complement the implementation of the new Basel III-compliant liquidity requirements recently issued by the CBU. The report also highlights that capital market development has become even more important in the new “lower-for-longer” oil price environment to diversify sources of funding for governments and firms and to support economic growth and diversification. The CBU’s reforms could be usefully complemented by governments’ efforts to develop domestic debt markets, including for Islamic instruments.

 

Related Links

Staff Report (PDF)

Selected Issues Report (PDF)

Keywords: Middle East and Africa, United Arab Emirates, Banking, Article IV, Basel III, Islamic Finance, IMF

Related Insights
News

EBA Finalizes Guidelines on the STS Criteria in Securitization

EBA published the final guidelines that provide a harmonized interpretation of the criteria for a securitization to be eligible as simple, transparent, and standardized (STS) on a cross-sectoral basis throughout EU.

December 12, 2018 WebPage Regulatory News
News

OSFI Sets Domestic Stability Buffer for D-SIBs at 1.75%

OSFI set the level for the Domestic Stability Buffer at 1.75% of total risk-weighted assets, as calculated under the Capital Adequacy Requirements (CAR) Guideline.

December 12, 2018 WebPage Regulatory News
News

FSI Publishes Paper on Proportionality in Insurance Solvency Rules

FSI published a paper on proportionality in the application of insurance solvency requirements.

December 11, 2018 WebPage Regulatory News
News

BCBS Updates Framework for Pillar 3 Disclosure Requirements

BCBS published the updated framework for Pillar 3 disclosure requirements.

December 11, 2018 WebPage Regulatory News
News

EBA Issues Revised List of Validation Rules for Reporting

EBA revised the list of validation rules in its implementing technical standards on supervisory reporting.

December 11, 2018 WebPage Regulatory News
News

IMF Reports Assess the Stability of Financial System in Brazil

IMF published a report on the results of the Financial System Stability Assessment (FSSA) on Brazil.

December 11, 2018 WebPage Regulatory News
News

FED Governor Examines Pros of Imposing Capital Buffers on Large Banks

At the Peterson Institute for International Economics in Washington D.C., the FED Governor Lael Brainard summarized the financial stability outlook, highlighted areas where financial imbalances seem to be building, and touched on the related policy implications.

December 07, 2018 WebPage Regulatory News
News

US Agencies Propose Rule on Appraisals for Real Estate Transactions

US Agencies (FDIC, FED, and OCC) proposed a rule to increase the threshold level at or below which appraisals would not be required for the residential real estate transactions from USD 250,000 to USD 400,000. Comments will be accepted for 60 days from publication in the Federal Register.

December 07, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: First Update for December 2018

This week one answer was published as part of the Single Rulebook Questions and Answers (Q&A).

December 07, 2018 WebPage Regulatory News
News

FED Updates Reporting Form and Instructions for FR Y-14Q

FED published the updated reporting form FR Y-14Q for Capital Assessment and Stress Testing, along with the associated instructions.

December 06, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2325