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UAE Central Bank To Increase Oversight Of Banks’ Real Estate Exposure

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

The Central Financial institution of the United Arab Emirates mentioned on Monday it will use new standards to oversee banks’ publicity to actual property, a vital sector of the Gulf state’s financial system which has been sluggish for years.

The regulator is introducing an “enhanced framework” that can cowl all kinds of on-balance-sheet loans and investments, and off-balance-sheet exposures to the true property sector, it mentioned in an announcement.

This may require “banks to evaluate and enhance their inside insurance policies to reinforce sound underwriting, valuation and common threat administration for his or her actual property exposures,” it mentioned.

Residential property costs in Dubai, one of many UAE’s emirates, had been falling since 2014 on excessive provide and weaker demand, forcing building corporations to chop jobs and halt enlargement plans, and resulting in rises in banks’ unhealthy loans.

However, the sector bounced again this 12 months, because of a profitable vaccination roll-out and an early easing of COVID-19 restrictions, which boosted Dubai’s financial system as commerce and journey sectors opened up.

“Banks with increased risk-weighted actual property publicity of their portfolios might be topic to a extra intensive supervisory evaluate of their underwriting and threat administration practices on this phase,” the central financial institution mentioned.

The regulator will give banks one 12 months to reinforce their practices to satisfy the brand new necessities, ranging from Dec. 30.

Source: Reuters

(The story has been published from a wire feed without modifications to the text. Only the heading has been changed)

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