‘UAE Economy Strong’ – Central Bank Governor

The UAE economy is strong and is registering high growth rates in economic and social sectors, according to the country’s central bank governor, Sultan bin Nasser Al Suwaidi.

“The banking system in the UAE is stable and has a high solvency sheet in accordance to the Basel III criteria,” he said in comments posted by official news agency WAM.

Al Suwaidi also stressed that banks operating in the country “enjoy a solid capital base.” At the end of October 2012, the volume of banks’ assets in the country reached $476 billion; deposits reached $316 billion and the volume of lending hit $296 billion, he said. The banking sector saw a total net profit of $6.7 billion by the end of October, he added.

Currently, there are 23 national banks in the UAE with 807 branches and 28 electronic units; 22 foreign banks with 83 branches and 52 electronic units and six Gulf banks with one branch each.

Al Suwaidi also said there are 113 representative offices of foreign banks, 25 financial companies, 23 investment companies, 120 exchange companies and 4, 346 ATMs in the country.

The UAE central bank works to “achieve financial stability in the country through the creation of a financial system that is able to address any risks,” WAM quoted him as saying.

However, a report issued by Moody’s Investors Service earlier this month said that the outlook for the UAE’s banking system remains negative.

The main reasons behind the outlook are asset quality challenges, especially for the Dubai-based banks and low provisioning coverage levels, said Moody’s.

“Moody’s expects problem loan levels to remain elevated, driven by exposures to large, stressed, government-related issuers (GRIs), and legacy corporate impairments, primarily real-estate-related, which are still emerging after failed attempts to restructure earlier in the crisis,” the report said.

“In Moody’s view, issues such as limited transparency, sizable related-party exposures and high loan and deposit concentrations will continue to leave UAE banks vulnerable to name-specific credit risks in the near term despite recent guidelines published by the Central Bank of the UAE,” it added.