Central Bank of UAE Governor seeks continued support of banks to the UAE economy

Dubai: The governor of Central Bank of the UAE (CBUAE) Khaled Mohamed Balama, held a meeting with the CEOs of all banks operating in the UAE to discuss nations macroeconomic environment.

At the meeting, he briefed the CEOs on CBUAE’s assessment of financial stability, and inform about the central bank’s ongoing regulatory and supervisory initiatives.

The agenda of the meeting was on role of banks in supporting UAE’s economic recovery by ensuring continued flow of credit to the economy.

The Central Bank of the UAE expects consumer prices to start rising again in the second half of 2021. Prices dropped on an average of -0.3 per cent in the first six months of 2021, the Gulf country's central bank said in its economic quarterly review. According to Bloomberg reports, this is because real estate prices and private consumption are still recovering from the COVID-19 pandemic, but "a move into positive territory is expected to start in the second half of 2021," the regulator said.

Meeting participants also discussed areas subject to close monitoring by the CBUAE, which included asset quality and credit conditions.

Role of banks

The CBUAE emphasised the role of banking sector in the continued flow of credit to the private sector, supported by different components of the CBUAE’s Targeted Economic Support Scheme (TESS).

The governor called on banks to support the economy and continue lending to credit worth customers in the context of its extension of TESS until June 30, 2022.

“Our assessment and recent economic data point to a post-pandemic rebound of the UAE economy. The UAE banking system remains resilient, and our support measures in the form of the CBUAE’s Targeted Economic Support Scheme and other measures will remain in place until the mid-2022,” said Balama.

Need for faster credit growth

Against the background of gradual economic recovery, continued government support, healthy funding growth and bank lending remains flat, reflecting subdued demand and the conservative risk appetite of banks.

Parties in the meeting discussed the pre-requisites and critical enablers for the banking sector to increase their support of the UAE economy, especially during the early stages of recovery.

They also also discussed the trends in the real estate market and the CBUAE’s proposed framework for surveillance and supervision of real estate exposures, with a view of addressing risks associated with lending to this sector.