UAE Banks Steady As Central Bank Support Cushions Impact Of Regional Tensions: S&P

2026-04-12 02:16:05

(MENAFN- Khaleej Times) Banks in the UAE are expected to remain resilient despite rising regional tensions, supported by timely relief measures from the Central Bank, according to a new report by S&P Global Ratings.

The agency said liquidity support and regulatory flexibility introduced by the Central Bank of the UAE (CBUAE) will help lenders navigate current uncertainty linked to the ongoing conflict in the Middle East. These measures come as part of a broader response by Gulf central banks to safeguard financial stability.

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S&P noted that UAE banks have not reported any significant outflows of foreign or domestic funding so far. However, the support framework provides additional buffers if conditions worsen or if funding pressures emerge.

CBUAE allowed lenders to access up to 30 per cent of their reserve balances and introduced term liquidity facilities in both UAE dirham and US dollar. It also temporarily eased liquidity requirements such as the liquidity coverage ratio and net stable funding ratio.

In addition, the Central Bank permitted the release of capital buffers and offered flexibility in loan classification. Banks can defer recognition of exposures for customers affected by the current situation, which is expected to support both corporate and retail borrowers.

According to S&P, these steps will give banks more room to manage liquidity and continue lending, although credit growth across the country and the wider Gulf region is likely to slow compared to earlier expectations.

Overall, ratings for GCC banks remain stable, the agency said. At the same time, Sharjah Islamic Bank is exempt from this outlook due to an already negative outlook pre-war due to pressure on its capital.

The report said the impact of the conflict on asset quality will become clearer over the coming quarters. Banks are expected to disclose the size of loans benefiting from relief measures, similar to transparency seen during the Covid-19 period.

Despite near-term risks, UAE banks are entering this phase from a position of strength. The sector maintains solid capital buffers and healthy asset quality indicators, with low levels of non-performing loans and strong provisioning.

S&P also highlighted the UAE government's strong capacity to support the banking system if needed. The country's substantial sovereign assets and track record of intervention provide an added layer of confidence for the sector.

While risks linked to the regional conflict persist, S&P said current support measures and strong fundamentals should help UAE banks weather the turbulence in the months ahead.