Featured Product

    CBUAE Assesses Stability of Financial System in UAE

    July 07, 2020

    CBUAE published the financial stability report, which assesses the resilience of the financial system and identifies issues in the banking and financial system that require additional support. The report presents a comprehensive assessment of the macro-financial conditions and the banking system in the country, including stress testing, regulatory developments, and other aspects relevant to financial stability. The report also includes valuable contributions and assessments of trends and developments in the payment systems, capital markets, and insurance sector.

    According to the report, the UAE banking system remained resilient in 2019, with the ability to withstand the challenging operating environment, as demonstrated by the regulatory stress tests. Capital ratios and liquidity buffers of banks remained adequate and well above the regulatory requirements. The capital adequacy ratio was 16.9% as of the end of March 2020 and the eligible liquid asset ratio was 16.6% as of the end of May 2020. The banking system remained profitable, with improved cost efficiency benefiting from efficiency gains related to recent mergers in the sector. Asset quality, however, represented a challenge with an increase in non-performing loans ratio, although partially mitigated by good provisioning levels. During the year, bank lending continued to grow at a steady rate, although its distribution was not broad-based. Retail lending registered a decline, while credit to certain sectors such as real estate and construction continued to grow, supported by improved affordability due to declining real estate prices.

    International exposures of the UAE banking system increased during 2019 underpinned by cross-border acquisitions and diversification in terms of foreign debt securities. The finance companies sector recorded a decline in total assets with profitability and cost-efficiency remaining under pressure in a challenging operating environment. Overall liquidity and capital ratios of the finance companies sector remained adequate and specific provision levels improved, with some notable differences between individual finance companies. The size of the finance companies sector represented only about one percent of the banking system. The year also marked concerted efforts from CBUAE including enhancement of regulatory frameworks regarding corporate governance, anti-money laundering, and the continued implementation of the Basel III capital adequacy standards with further focus on financial technology and cyber risks. The UAE payment systems remained resilient and continued to operate without any major disruptions. 

    Looking ahead, the COVID-19 pandemic has radically changed the outlook for global and domestic activity in 2020 and brought volatility into the financial markets. However, stress tests demonstrate that the UAE banking sector is able to withstand macro-financial shocks of any size. The UAE government and CBUAE have taken a wide range of measures to mitigate the adverse impact of COVID-19 pandemic and launched substantial financial programs to help affected individuals and corporates and the economy at large. In addition, the temporary measures introduced by CBUAE include the IFRS 9 guidance, postponement of the implementation of remaining Basel III standards and regulatory stress testing to ease the operational burden on the banks, and prudential filters to neutralize the effects of increased provisioning on capital base of banks. This financial stability report focuses on developments during 2019; therefore, the consequences of the COVID-19 pandemic for the banking system are not visible in this report.

     

    Related Links

    Keywords: Middle East and Africa, UAE, Banking, Financial Stability Report, Regulatory Capital, Basel, Stress Testing, Credit Risk, IFRS 9, COVID-19, Fintech, Cyber Risk, CBUAE

    Featured Experts
    Related Articles
    News

    EBA Launches Stress Tests for Banks, Issues Other Updates

    The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.

    January 31, 2023 WebPage Regulatory News
    News

    EBA Proposes Standards for IRRBB Reporting Under Basel Framework

    The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.

    January 31, 2023 WebPage Regulatory News
    News

    FED Issues Further Details on Pilot Climate Scenario Analysis Exercise

    The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.

    January 17, 2023 WebPage Regulatory News
    News

    US Agencies Issue Several Regulatory and Reporting Updates

    The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.

    January 04, 2023 WebPage Regulatory News
    News

    ECB Issues Multiple Reports and Regulatory Updates for Banks

    The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.

    January 01, 2023 WebPage Regulatory News
    News

    HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements

    The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.

    December 30, 2022 WebPage Regulatory News
    News

    EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR

    The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.

    December 29, 2022 WebPage Regulatory News
    News

    CBIRC Revises Measures on Corporate Governance Supervision

    The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.

    December 29, 2022 WebPage Regulatory News
    News

    HKMA Publications Address Sustainability Issues in Financial Sector

    The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.

    December 23, 2022 WebPage Regulatory News
    News

    EBA Updates Address Basel and NPL Requirements for Banks

    The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.

    December 22, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8700