'UAE banking sector resilient because of government support'

Resilience - this was the key word and highlight of the UAE banking sector outlook report that was released at the beginning of this year by S&P Global Ratings, and it essentially encapsulates the core of the sector in the emirates. The rating agency noted that the sector will remain resilient this year, and register a mid-single-digit credit growth supported by government spending on key investment projects. While it did mention a few caveats of low oil prices, or geopolitical, it did not factor in the impact of the ongoing Covid-19 crisis. 
Much has changed in the last few weeks since the release of this report in February, yet the key observation on the core strength of the sector remains in place and this is what would help the emirates through a wave of challenges posed by the pandemic.

At the start of this year, concerns were brewing over the rapid spread of the novel coronavirus in Wuhan, China. Countries across the globe were watching the development, but none would have expected the viral infection to unravel the way it has in the last couple of months. The pandemic is not just a health crisis; it is unfolding as an economic crisis too, which could take a severe toll on nations.

Countries with strong banking institutions and channels, with the right government support should be able to offer support to the people and economy on the whole. We can see that happening in the UAE. On March 14, the UAE Central Bank rolled out a Dh100 billion stimulus package to mitigate the impact Covid-19 on the country's economy. It was boosted to Dh256 billion this month on April 5 when the banking regulator halved banks' capital buffer requirements to seven per cent.

The Central Bank has also allowed banks and finance companies to defer the principal amount of the loans and interest until the end of this year through the Targeted Economic Support Scheme (Tess) for affected retails and corporate customers. Measures such as these would go a long way in supporting the economy and people who are at the heart of this challenging time.

Besides, reassurance from Abdulaziz Al Ghurair, Chairman of the UAE Banks Federation (UAEBF), that banks do not need any further support from the central bank for now, is a sign of confidence.

There is liquidity in the system and the banks are all geared to extend help to individuals and small and medium businesses, who might need some hand holding at the moment. Of the Dh256 billion central bank initiative, Dh205 billion is liquidity which is being made available to banks for lending, and the rest would be used as relief package for individual borrowers and companies in sectors affected by the coronavirus.

These are challenging times, and there is no denying that it would be a rough ride ahead. Banks would not be able to maintain their profitability levels, and the asset quality might deteriorate too, but the sector has been adequately propped up by the UAE Central Bank, and I should be able to offer much-needed support to the economy.

UAEBF: Promoting the UAE's growth
Established in 1982, UAEBF is a professional representative body of the member banks operating in the UAE, representing 52-member banks. The not-for-profit organisation advocates banks' interests and enhances cooperation and coordination among them so as to upgrade the banking industry for the benefit of the banking sector and national economy. The Board of Directors today is chaired by Abdul Aziz Abdullah Al Ghurair, CEO of Mashreq.

For almost four decades now, the organisation has been taking progressive steps to banking such as digitalisation, protecting against fraud and sustainability. Its primary aim is to make the UAE banking sector grow in a way that benefits, protects and enhances the interests of banks, consumers, society and the UAE economy.

In March 2020, UAE UBF launched two technical committees (Fintech and Consumer Protection) and three advisory committees (Compliance, Risk, and Information Security) to promote the growth and transformation of the UAE banking sector. The Fintech Committee has been introduced to foster an environment conducive to product and partnership innovation in the banking industry, and improve capabilities in technology to achieve sustainable growth. The Consumer Protection Committee has been introduced to look after all consumer protection issues in the UAE banking sector.

The Compliance Advisory Committee, Risk Advisory Committee, and Information Security Advisory Committee are the UBF's first advisory committees launched. Comprising senior banking representatives, they have been introduced to advise their respective main technical committees.
UAEBF has achieved many significant milestones recently, including rolling out plans to tackle counterfeit cheques and enhanced encryption technology. The federation also supported the launch of the 'Credit Guarantee Scheme' for SMEs by Emirates Development Bank, an initiative that provides a stable funding base.