UAE says its banks are capitalized enough to withstand any shock

Banks in the UAE are adequately capitalized to withstand any macro-financial shock caused by the coronavirus crisis and the drop in oil prices, says the country's central bank.

The statement was in reaction to rating agency Moody's warning that the two factors would hit bank profits hard in the oil-producing Gulf region.

Moody's said it expects the provisioning charges of Gulf banks for possible loan losses to rise sharply.

The UAE central bank says that local banks have a capital adequacy rate of 16.9 percent as of the end of March and its eligible liquid asset rate was 16.6 percent as of May, way above minimum regulatory requirements.

The pandemic has immobilized major sectors of the UAE economy over the past few months, while others, such as real estate, have been sluggish.

The UAE central bank noted that the country's property sector would continue to be risky for UAE banks because of the coronavirus crisis and the developers' persistent supply and demand imbalances and deteriorating financial performance.

It added that companies that the pandemic would distress companies causing their debt-servicing capacity to deteriorate this year.