Featured Product

    IMF Reports on 2017 Article IV Consultation with United Arab Emirates

    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

    Featured Experts
    Related Articles
    News

    APRA Publishes Submission on Fintech and Regtech

    APRA published its submission, to the Senate Select Committee, on financial technology and regulatory technology.

    January 21, 2020 WebPage Regulatory News
    News

    ECB Consults on Guideline on Threshold for Credit Obligations Past Due

    ECB published a draft guideline, along with the frequently asked questions (FAQs), on the definition of the materiality threshold for credit obligations past due for less significant institutions.

    January 20, 2020 WebPage Regulatory News
    News

    BIS Discusses Role of Central Banks in Addressing Climate Change Risks

    BIS published a book that reviews ways of addressing the climate change risks within the financial stability mandate of central banks.

    January 19, 2020 WebPage Regulatory News
    News

    FSB Report Examines Global Nonbank Financial Intermediation Activity

    FSB published the ninth annual report examining the global non-bank financial intermediation activity.

    January 19, 2020 WebPage Regulatory News
    News

    OSFI Publishes Instruction Guide on Solvency Information Return

    OSFI published an instruction guide to assist administrators of pension plans in completing the Solvency Information Return that is required to be filed with OSFI.

    January 17, 2020 WebPage Regulatory News
    News

    EU Amends IFRS 9 Rule, Changes Concern Interest Rate Benchmark Reforms

    EU published Regulation 2020/34 regarding the International Accounting Standard (IAS) 39 and International Financial Reporting Standards (IFRS) 7 and 9.

    January 16, 2020 WebPage Regulatory News
    News

    FDIC and OCC Issue Statement on Heightened Cyber Security Risk

    In response to the heightened cyber-security risk facing the financial services industry and other critical business sectors, FDIC and OCC issued an interagency statement on heightened cyber-security risk.

    January 16, 2020 WebPage Regulatory News
    News

    BCRA Updates Regulation on Capital Requirements and Information Regime

    BCRA updated the rules on minimum capital requirements for financial entities and on certain aspects of the information transparency regime for quarterly and annual supervision.

    January 16, 2020 WebPage Regulatory News
    News

    BoE and FCA Outline Next Steps for LIBOR Transition in 2020

    BoE, FCA, and the Working Group on Sterling Risk-Free Reference Rates (RFRWG) have published a set of documents that outline the LIBOR transition priorities and milestones for 2020.

    January 16, 2020 WebPage Regulatory News
    News

    BIS to Expand Central Bank Membership

    BIS is to expand its central bank membership base and to increase collaboration in its work as a forum for international cooperation and as a hub for central banks and other financial authorities.

    January 14, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 4511