Emirates shows great strength in its financial system | Atalayar
Aiming to become “one of the world’s leading central banks to enhance monetary and financial stability and support the UAE’s competitiveness”, in the words of financial experts, The Central Bank of the United Arab Emirates (CBAE) has published its annual Financial Stability Assessment of the United Arab Emirates. The latest report focuses on the UAE’s efforts to support the national economy amid the COVID-19 pandemic.
The report discusses the main mechanisms developed on this occasion, such as the gradual exit of the Central Bank of the United Arab Emirates from the targeted economic support program, which was divided into three phases: the first phase was completed at the end of 2021, the second phase at the end of June 2022 and the third phase was announced for the second half of 2022.
In addition, the ECBUA devotes a large part of its report to performing solvency and liquidity stress tests to investigate potential vulnerabilities. If nothing else, the results highlight the comfortable headroom the UAE has in terms of adequate capital and liquidity to withstand severe shocks. Indeed, UAE Central Bank Governor Khaled Mohamed Balama said that “the Financial Stability Report records the CBUAE’s approach to identifying and mitigating potential systemic risks and safeguarding the stability and resilience of the sector. financial institution of the UAE”.
Furthermore, while the risk of a potential deterioration in asset quality and insufficient changes in banks’ business models lead the report’s authors to highlight the risks that the UAE banking system could face, the report highlights the improvement of Central Bank systems, as well as its cyber resilience, in a context of accelerating digitalization of financial services.
To finish, the report highlights the correlation between the performance of the UAE government and the recovery of economic activity in the country, because the measures taken by the country’s Central Bank have enabled the resilience and gradual recovery of the national banking and financial system.
Currently, against the backdrop of the global economic recovery and post-COVID-19 stimulus, economic and financial projections look even better for 2022, although “The global macro-financial outlook could, however, be affected by supply chain disruptions, growing inflationary pressures and growing geopolitical tensions,” notes the report. In this regard, the Governor of the Central Bank of the United Arab Emirates underlines that he and his experts “will continue to closely monitor the evolution of global vulnerabilities and will stand ready to take additional measures if necessary”.