UAE Central Bank strengthens supervision of banks’ real estate exposure

0

DUBAI, Dec. 20 (Reuters) – The United Arab Emirates ‘central bank said Monday it would apply new criteria to monitor banks’ exposure to real estate, a key sector of the Gulf State’s economy that has been sluggish for years.

The regulator is introducing an “expanded framework” that will cover all types of on-balance sheet loans and investments, as well as off-balance sheet exposures in the real estate sector, a statement said.

This requires “banks to review and improve their internal policies to improve solid underwriting, valuation and overall risk management for their real estate exposures,” it said.

Register now for FREE unlimited access to Reuters.com

to register

Housing prices in Dubai, one of the emirates of the United Arab Emirates, had fallen since 2014 due to high supply and weaker demand, forcing construction companies to cut jobs and abandon expansion plans, and led to a surge in non-performing loans from banks.

But the sector rebounded this year thanks to a successful rollout of vaccinations and an early relaxation of COVID-19 restrictions that boosted Dubai’s economy with the opening of the trade and travel sectors.

“Banks with higher risk-weighted real estate exposure in their portfolios will be subject to a broader prudential review of their underwriting and risk management practices in this segment,” the central bank said.

The regulator will give banks one year from December 30th to improve their practices to meet the new requirements.

Register now for FREE unlimited access to Reuters.com

to register

Reporting by Hadeel Al Sayegh; Editing by Rashmi Aich

Our Standards: The Thomson Reuters Trust Principles.


Source link

Share.

Comments are closed.