The UAE banking sector is well-capitalised and resilient to absorb significant macro-financial shocks, the Central Bank said on Tuesday.
The apex bank said the UAE banking system entered 2020 from a strong position despite the significant uncertainties from the Covid-19 pandemic.
"Capital ratios and liquidity buffers of the banking sector remained adequate and well above regulatory requirements. The banking system remained profitable with improved cost-efficiency benefitting from efficiency gains related to recent mergers in the sector," the central bank said in its 2019 Financial Stability report released on Tuesday.
The capital adequacy ratio increased slightly to 17.7 per cent in 2019.
Abdulhamid Saeed, governor of the Central Bank of the UAE, said challenges posed by Covid-19 must not be underestimated.
"The central bank is well prepared to further support the UAE economy through maintain the stability of the UAE financial and banking system and overcoming he challenges ahead," he said.
The apex bank noted that local banks' asset quality have slightly deteriorated as moderate increases in non-performing loans persisted throughout 2019.
"The banking system remained profitable with improved cost efficiency that benefited from mergers in the sector. Despite the resilience of the overall banking sector, the challenges posed by the Covid-19 pandemic will affect banks operating environment in 2020," the regulator said.
Growth in loan exposures by the UAE banking system was sustained during 2019, with a 6.1 per cent year-on-year growth to Dh1,729 billion, primarily driven by lending to the government, and government related entities.
Lending to household and private sector corporates was relatively slow in comparison to previous years. Local banks' loan exposure to real estate reached Dh408.1 billion in 2019 with a growth rate of 7.9 per cent compared to 8.2 per cent in 2018. Exposure to completed real estate projects represents 70.5 per cent of banks' total real estate loan exposure, it added. - firstname.lastname@example.org
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