The COVID-19 pandemic, lower oil prices, and continued pressure on the real estate sector have increased risks for UAE banks, S&P Global Ratings said in a report on Sunday.
It expects the sector’s problem loans to increase further once current regulatory forbearance measures are lifted and banks start to account for the impact of the economic shock. However the process is expected to be gradual, minimizing the overall impact.
After the pandemic started, the UAE Central Bank (CBUAE) implemented a Targeted Economic Support Scheme (TESS), which helped ease the pressure on corporate issuers and small and mid-size enterprises, S&P said. But it did not reduce credit risk on the banking system’s balance sheet.
“The UAE has a wealthy economy with strong fiscal and external positions. The strength of the government’s net asset position has helped counteract the negative impact of lower oil prices on economic growth since late 2015.—AN