Already contending with the fallout from the Eurozone crisis and high provisions for bad loans, banks in the UAE face a further challenge in the second half of the year — new central bank regulations that may further curb their sluggish lending growth.
While there have been exceptions — First Gulf Bank saw its loans grow 5.9 per cent in the first half — UAE central bank data show total loans and advances in the system grew by just 1.8 per cent in the first six months of 2012.
Lending growth is a key driver of the UAE banks’ profits, and analysts fear any chance of a revival could be further delayed by a recent central bank circular that caps lending to local governments and related entities at 100 per cent of capital, with effect from end of September. Another regulation requires banks to have at least 10 per cent of their liabilities in liquid assets by the end of the year.
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