The UAE banks’ aggregate lending and deposit growth remain stable based on the most recent data and the sector holds good level of liquidity and capital, said the Central Bank of the UAE (CBUAE) in its Financial Stability Report (FSR).
The report provides information, analysis and an assessment of the resilience and matters that require additional support in the banking and financial system in the UAE promoting public understanding and transparency, reported Emirates news agency Wam.
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.
According to the report, the UAE banking system concluded the year 2019 in a resilient position with adequate capital and liquidity buffers well above regulatory requirements. The banking system remained profitable due to the effectiveness and improved cost efficiency benefitting from efficiency gains related to recent mergers in the sector.
During the first quarter of 2020, the outbreak of the Covid-19 pandemic changed the outlook for global and domestic economic activity, posing challenges to the operating environment of the banking sector. "However, our stress tests demonstrate that the UAE banking sector is able to withstand macro-financial shocks of any size," the bank said in a statement.
The government of the UAE and CBUAE have taken a wide range of measures to mitigate the adverse impact of Covid-19 pandemic and launched substantial financial programmes to help affected individuals and corporates and the economy at large.
In addition, the temporary measures introduced by the CBUAE included the 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 Capital Adequacy Ratio was 16.9 per cent as of end March 2020 and the Eligible Liquid Asset Ratio was 16.6 per cent as of end May 2020, well in excess of the minimum regulatory requirements," according to CBUAE.
Abdulhamid Saeed, Governor of the Central Bank of the UAE, said, "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."