The Central Bank: The UAE banking sector is well capitalized and has sufficient liquidity reserves

The Central Bank of the Emirates issued the Financial Stability Report for the year 2022 for the UAE, including its comprehensive assessment of the stability of the financial system. The report emphasized that the financial system remained resilient and stable throughout the year despite the challenges the world faced, and that the banking sector is still well capitalized and has sufficient liquidity reserves.
The report includes the local and global macro financial conditions, local asset markets, the results of evaluating the banking system, non-bank financial institutions, financial infrastructure, the set of tools that the Central Bank employs in performing its tasks in the field of macro-prudentialism, and an analysis of other important developments; Such as digitization and the sustainability of the financial sector, embodying its continued pivotal role in enhancing competitiveness and supporting the resilience of the national economy.
Protect the financial system

The report indicated that the stimulating local conditions contributed to protecting the UAE financial system from the repercussions of adverse global trends, while the risk rate remained within safe limits and without change compared to the previous year.
The report indicated that the growth of the real GDP of the country accelerated during the year, thanks to the strong recovery in the non-oil GDP, and the significant expansion in the oil GDP, while the pace of growth of the global economy decreased during the year 2022, with external risks remaining high, in an environment It was marked by high inflation, tightening financial conditions, and persistent geopolitical tensions.
The report showed the extent to which the UAE banking system will benefit from the country’s macroeconomic recovery in 2022; Where credit witnessed growth, especially lending to the private sector, while the profitability of the banking sector exceeded pre-pandemic levels; due to higher interest margins; and lower provisions for impairment of assets.
Ability test
The stress test conducted by the central bank, to measure the ability of state banks to face the risks of inflation accompanied by a hypothetical economic recession, and uncertainties in the market, shows that the banking sector possesses sufficient capital and liquidity, to face a sharply negative hypothetical scenario, and to continue Supporting the economy by maintaining the credit offer to borrowers in the country.
The report highlights developments in the sectors of non-bank financial institutions in 2022. It indicates that the insurance sector in the country remained sound in terms of precaution, and witnessed sustainable business growth, by exceeding the total written insurance premiums of pre-pandemic levels. The finance companies sector also maintained its resilience despite the increasing contraction in the volume of business, while the exchange sector continued to achieve profits, in addition to the recovery achieved by non-oil commercial activities.
Payment systems
In the field of payment systems, the report indicated that the payment systems operated by the Central Bank were equally effective in 2022, which led to an increase in the volume and value of transactions, driven by economic growth and continuous digitization efforts.
In the field of sustainability, the report pointed to the importance of managing climate-related financial risks, with the need for financial institutions to take advantage of the opportunities resulting from the global economy’s growing need for sustainable financing.
best practices
Khaled Mohamed Balama, Governor of the Central Bank, said: “Within the framework of our vision to be among the best central banks in the world in promoting monetary and financial stability, the State Financial Stability Report for the year 2022 reflects the best international practices followed by the Central Bank in maintaining a stable, sustainable and resilient financial sector.” To face potential risks and support the competitiveness and diversity of the financial sector, in line with the strategic plans and future directions of the country.