Dubai: Total banking sector assets in the UAE rose 1 percent quarter-on-quarter to 3.2 trillion dirhams at the end of June, according to the Central Bank. In the 12 months ending in June, the total assets of banks operating in the UAE increased 0.6%. Total credit increased 0.9% quarter on quarter to 1.76 trillion dirhams.
Total customer deposits with banks in the United Arab Emirates increased 1.5% to reach MAD 1.9 trillion. Resident deposits increased 0.3% to Dh1.68 trillion, while non-resident deposits increased 10.9% to Dh225.7 billion.
The improvement in credit growth was reflected in the overall money supply. M1 money supply, which includes money in circulation outside banks (money issued minus liquidity in banks) plus monetary deposits, increased by 2.7% in Q2-2021.
The measure of money supply as M2 which includes M1 plus term deposits and savings of residents in dirhams, as well as deposits of residents in foreign currencies increased by 0.1% quarter on quarter during the second quarter 2021. On an annual basis, there was a 2.1% year-over-year decrease in M2 money supply increase, reaching MAD 1.48 trillion at the end of the second quarter of 2021.
Money supply measured by M3 (M2 plus government deposits with banks and central bank) increased by 0.4% quarter-on-quarter in the second quarter of 2021. On an annual basis, M3 recorded a 1.2% year-on-year growth. .
What is the capital adequacy ratio?
Capital adequacy ratios measure a bank’s capital expressed as a percentage of its risk-weighted exposures. A high capital ratio provides protection for depositors and promotes the stability and efficiency of the financial system. As of December 2017, UAE banks follow Basel III principles for calculating capital adequacy ratios.
Typically, M2 money supply is considered to be the best indicator of the availability of liquidity in the economy, as it includes money in circulation outside banks, in addition to the various deposits of all sectors resident in dirhams (except public sector deposits in the United Arab Emirates). Data from the central bank showed that at the end of the second quarter of 2021, there had been a quarterly increase in M2.
Capital and reserves
UAE banks continued to score points on capitalization levels, with banks’ aggregate capital and reserves increasing 1.7 percent quarter-on-quarter to 384.5 billion dirhams. At the end of the second quarter, the total capital adequacy ratio stood at 17.5 percent, remaining well above the required 13 percent. The capital adequacy ratio, including the capital conservation buffer requirement of 2.5% and the Tier1 ratio of 8.5%, remains above compliance with Basel III guidelines.
aggregate capital and reserves of UAE banks
Although the capital conservation buffer remains at 2.5%, banks have been authorized to draw on it up to a maximum of 60% without prudential consequences from March 15, 2020 as part of regulatory abstention measures. COVID-19. The buffer for systemically important national banks (D-SIBs) remains the same, but they can use 100% of their D-SIB buffer without prudential consequences.
Central Bank Assets
At the end of the second quarter of 2021, the external assets of the central bank increased by 2.7% to reach 403.1 billion dirhams. This is mainly due to the quarterly increase in foreign securities of 46 percent, as well as the reduction in current account balances and deposits with banks abroad by 10.6 percent and other foreign assets by 10.6 percent. 7.7 percent.