UAE banks exceed global adequacy laws

Commercial banks in the UAE have heeded Central Bank instructions and largely surpassed international standards on capital adequacy by strengthening their reserves and tightening credit rules, according to their balance sheets.

At the end of 2001, all national and foreign banks were far ahead of the 8 per cent floor set by the Bank for International Settlement for financial institutions worldwide to ensure they have sufficient funds to face a possible financial crisis.

Balance sheets of some banks showed their adequacy has surged to more than 10 times the BIS limit, exceeding 100 per cent while other banks which have been warned by the Central Bank to lift their adequacy reported they no longer lagging behind.

The highest capital adequacy in national banks was reported by the National Bank of Sharjah (NBS), standing at a staggering 102.6 per cent at the end of 2001, according to the annual bulletin of the Emirates Banks Association.

In foreign banks, Bangladesh's Janata Bank was on the top, recording an adequacy of 110.00 per cent after boosting reserves and maintaining asset size.

Bankers said the increase in the capital adequacy, the ratio between the bank's assets and shareholders equity, came after most banks complied with the directives of the UAE Central Bank and built up their capital and financial reserves.

"Most banks now have a strong financial position...it is set to strengthen further as they press ahead with capital and reserve build up," a bank manager said.

Bank figures showed the shareholders' equity of the UAE's 20 national banks at the end of 2001 grew to around Dh28.5 billion ($7.76 billion) from nearly Dh 26.3 billion ($7.6 billion) at the end of 2000.

The increase was mostly in both reserves and the paid-up capital, which alone totalled around Dh 11 billion ($2.99 billion) at the end of last year.

The 26 foreign banks operating in the country also reported an increase in shareholders' equity to around Dh7.03 billion ($1.91 billion) from Dh6.82 billion ($1.85 billion). Their paid-up capital was slightly higher at Dh2.89 billion ($787 million) at the end of 2001.

The Middle East Bank (MEB) ranked second among national banks in terms of liquidity, which was 52.9 per cent at the end of 2001. It was followed the Arab Bank for Investment and Trade (ARBIFT), with an adequacy of 41.4 per cent, and the Abu Dhabi Islamic Bank, with 38.3 per cent, accordin to the bulletin.

Despite their vast assets, the National Bank of Dubai (NBD), the Emirates Bank International (EBI), the Abu Dhabi Commercial Bank (ADCB) and the National Bank of Abu Dhabi (NBAD) reported an adequacy level of more than double the BIS limit.

In foreign banks, the Arab African International Bank had the second highest adequacy of 94.00 per cent, followed by the National Bank of Bahrain, at 64.8 per cent. The lowest adequacy was recorded by the National Bank of Oman, at 10.30 per cent.