UAE banks have sufficient capital and liquidity reserves to withstand severe adverse scenarios, the country’s central bank said in a report.
However, the main risks to the banking system stem from the potential for further deterioration in asset quality post-pandemic and insufficient changes in banks’ business models given digital transformation, climate change and increasing governance requirements. business, he said.
According to the Financial Stability Report, released by the Central Bank of the United Arab Emirates (CBUAE), its payment systems remained robust uninterrupted in 2021. The apex bank further strengthened its steps towards digital transformation and cyber resilience .
CBUAE’s Targeted Economic Support Program (TESS), which was deployed to mitigate the financial and economic repercussions of the pandemic, has helped cushion the negative impact of the pandemic in 2020 and facilitate economic recovery throughout. of 2021, the central bank noted.
The TESS deferral scheme, designed to provide temporary loan and funding repayment relief, has benefited over 322,000 pandemic-affected bank customers, spanning retail, SME and corporate borrowers. The TESS deferral program supported up to 15% of total bank lending/funding at the height of the pandemic.
The outlook for 2022 remains optimistic, but depends on global factors such as the evolution of the Ukrainian conflict, the pandemic, as well as the normalization of fiscal and monetary policies and supply chain disruptions.
Khaled Mohamed Balama, Governor of the Central Bank of the United Arab Emirates, said: “The CBUAE forecasts a positive outlook for the economy and financial system of the United Arab Emirates in 2022. The global macro-financial outlook, however, will be negatively affected by supply chain disruptions, mounting inflationary pressures and further escalation of geopolitical tensions.”
The CBUAE forecasts that real GDP growth will increase further to 5.4% in 2022, supported by higher economic activity and higher oil prices, with non-oil GDP increasing by 4.3% while forecasts for growth for 2023 for aggregate real GDP and non-oil real GDP is 4.2% and 3.9%, respectively.
(Written by Seban Scaria [email protected]; editing by Daniel Luiz)