Emirates News Agency – CBUAE’s Financial Stability Report highlights UAE’s strong financial system supporting national economy

ABU DHABI, 11th August, 2022 (WAM) — The Central Bank of the United Arab Emirates, CBUAE, has released its Financial Stability Report 2021, which outlines the measures CBUAE is taking to support the national economy during the COVID-19 pandemic, Maintain the stability of the financial system.

These key steps include the CBUAE’s strategy to phase out the Targeted Economic Support Scheme (TESS) as the UAE’s economic recovery begins, with the first phase to be completed by the end of 2021 and the second phase to end in June 2022. The CBUAE will maintain the final third phase of the TESS measures in the second half of 2022.

The CBUAE also conducts risk-based regulation and solvency and liquidity stress tests to assess potential vulnerabilities. Overall, these tests suggest that the UAE banking system has sufficient capital and liquidity buffers to withstand a severe shock.

The report outlines risks to the banking system stemming from a potential deterioration in asset quality and insufficient changes in banking business models amid global digital transformation, climate change and increasing governance requirements.

The UAE government’s response to the COVID-19 pandemic has contributed to a rebound in overall economic activity in the UAE. The CBUAE’s measures support the recovery of the national banking system and the wider financial system to pre-pandemic levels.

Additionally, the report covers CBUAE’s payment system, which has proven robust in 2021. As the digitization of financial services accelerates, the central bank has further refined the system, strengthened digital transformation, and ensured cyber resilience.

Khaled Mohamed Balama, Governor of the Central Bank of the UAE, said: “The Financial Stability Report documents the CBUAE’s approach to identifying and mitigating potential systemic risks and maintaining the stability and resilience of the UAE’s financial sector. The report forecasts an impact on the national economy and financial system for 2022.

“However, the global macro-financial outlook could be affected by supply chain disruptions, rising inflationary pressures and further escalation of geopolitical tensions. We will continue to monitor evolving global vulnerabilities closely and stand ready to take additional measures if necessary.

“CBUAE’s vision is to become a top global central bank that enhances monetary and financial stability and supports the UAE’s competitiveness. We share this determination with the UAE leadership and licensed financial institutions, and together we are implementing an ambitious transformation strategy to achieve this goal.”