Capital adequacy of UAE banks jumps to 18.1%

Media In – Abu Dhabi 25 September 2018 WAM

 The banking sector’s capital adequacy ratio rose to 18.1% by the end of August this year, the highest since December 2017. The new index of the UAE banking system’s liquidity is also in line with the increase in the capital adequacy ratio for the first quarter from 16% at the end of 2017 to 16.6% in August. As banks achieve this ratio of capital adequacy, they have strengthened their financial solvency and exceeded the requirements of the central bank and the standards imposed by international financial institutions. According to Central Bank standards, the combined effects of changes in loans and deposits are important indicators of the financial solvency of the banking system. Two major ratios are observed in relation to banks’ financing: loan to deposit ratio and lending to stable financial resources. The loan-to-deposit ratio of the banking system as a whole was 95.8%. During the first eight months of this year, while liquid assets as a percentage of total assets reached 16.7%. The ratio of liquid assets includes the ratio of mandatory reserve with banks under the applicable instructions and certificates of deposits held by the Central Bank in addition to excessive reserves and weighted government bonds The level of zero risk, public sector debt and cash in banks according to the standards imposed by the Central Bank. It is noteworthy that the capitalization of conventional banks usually outperform their Islamic counterpart in terms of capital adequacy ratio as evidenced by statistics issued by the Central Bank.