The Central Bank of the UAE (CBUAE)’s recent Financial Stability Report (FSR) states that the UAE’s banking sector can withstand any form and size of Macro-Financial shock.
The CBUAE Financial Stability Report provides information, analysis and an evaluation of the resilience and matters that need further support in the UAE’s banking and financial system, enhancing public understanding and transparency.
The report covers macro-financial conditions, regulatory developments, assessments of the banking and finance sector, as well as assessments of payment systems, capital markets and the insurance sector.
The report suggests that the UAE’s banking system concluded the year 2019 in a robust position with adequate capital and liquidity buffers which were well above the regulatory requirements. The banking system was profitable due to the effectiveness and improved cost efficiency benefitting from efficiency gains related to recent mergers in the sector.
CBUAE remarked that irrespective of the challenges which were introduced by the outbreak of the COVID-19 pandemic, its “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 extensive measures to decrease the unfavorable impact of COVID-19 pandemic and launched ample financial programs to aid affected individuals and corporates and the economy at large.
The CBUAE’s temporary measure consisted of IFRS 9 (International Financial Reporting Standard), guidance and prudential filters that were designed to ensure financial and prudential reporting of financial institutions adequately, reflect the COVID-19 operating environment.
The bank stated, “Based on the most recent data, the aggregate lending and deposit growth remain stable and the banking sector in the country holds a good level of liquidity and capital. The Capital Adequacy Ratio was 16.9 percent as of end-March 2020 and the Eligible Liquid Asset Ratio was 16.6 percent as of end May 2020, well in excess of the minimum regulatory requirements.”
Governor of the Central Bank of the UAE, Abdulhamid Saeed stated, “The Financial Stability Report demonstrates a robust and resilient banking system in the UAE. The banking system proved its ability to face the consequences of COVID-19 pandemic and perform its role in supporting the economy, further reinforced by the CBUAE’s proactive Targeted Economic Support Scheme reaching AED 256 billion since its launch, but we shall remain vigilant and take the necessary and appropriate measures to further support the UAE’s economic growth.”
