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UAE lenders stay the course as Central Bank measures cushion economic shock
The UAE banking sector continues to stand on solid ground, backed by proactive regulation, strong capital buffers and a fast pace of digital transformation
- PUBLISHED: Fri 24 Apr 2026, 12:55 PM
The UAE’s financial system has weathered the storm, showing remarkable resilience amid unprecedented global and regional market volatility, with no meaningful fallout for the health of the banking sector or the stability of payment systems, experts say.
Senior officials, bank executives and industry analysts agree that UAE banks are well-positioned to stay the course despite heightened regional tensions. This resilience has been underpinned by swift and targeted interventions from the Central Bank of the UAE, which moved quickly to cushion the impact on the economy.
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The central bank and local lenders have gone the extra mile by rolling out relief packages aimed at supporting customers, particularly small and medium-sized enterprises (SMEs), as they navigate challenges linked to the US-Iran conflict, according to experts.
“The relief packages and timely support extended by UAE banks and financial institutions to their customers and SMEs have hit the right notes, helping to steady the domestic economy in the face of considerable headwinds,” an analyst noted.
“The UAE banking sector continues to stand on solid ground, backed by proactive regulation, strong capital buffers and a fast pace of digital transformation.”
Sheikh Mansour bin Zayed Al Nahyan, Vice-President, Deputy Prime Minister, Chairman of the Presidential Court, and Chairman of the Board of Directors of the Central Bank of the UAE (CBUAE), recently chaired the board meeting and affirmed that the UAE’s enduring financial and economic strength is rooted in the forward-looking vision of the UAE’s leadership.
“The CBUAE’s precautionary policies and proactive frameworks have consistently demonstrated their effectiveness in promoting the resilience and preparedness of the financial and banking sector, while ensuring monetary and financial stability. These achievements are a testament to the sustained confidence in our system and the global competitiveness of the UAE’s national economy," Sheikh Mansour said.
Stepping up resilience
The CEOs Advisory Council of the UAE Banks Federation (UBF) also endorsed the central bank’s timely relief measures under comprehensive financial institution resilience package and said as the UAE banking system enters 2026 from one of its strongest balance-sheet positions in years.
Abdulaziz Al Ghurair, who chaired the meeting, said the UAE has consolidated its position as a leading financial and banking hub and attributed the credit to the country’s leadership’s vision and supported by advanced strategies and policies.
“The comprehensive financial institution resilience package reflects the central bank’s commitment to ensuring stability and enabling the sector to continue driving socio-economic development,” Al Ghurair, Chairman of UBF, said.
The UAE’s total banking assets rose to about Dh5.34 trillion by the end of 2025, marking an increase of more than Dh780 billion over the year, while deposits climbed to roughly Dh3.3 trillion, reflecting sustained confidence among residents and international investors. Credit expansion also remained robust, with total bank lending reaching approximately Dh2.57 trillion in 2025, driven by stronger financing to the private sector, government-related entities and strategic industries supporting economic diversification.
The banking sector fundamentals remain equally strong as the banking system’s capital adequacy ratio stood around 17.3 per cent in 2025, well above regulatory requirements, while the net non-performing loan ratio remained contained at about 1.7 per cent, underscoring asset-quality resilience. These buffers position UAE banks among the most resilient in emerging markets, according to analysts.
Liquidity support, regulatory flexibility
Jamal Saleh, Director-General of UBF, said the federation is intensifying coordination with regulators and member banks to ensure the system remains agile amid global economic shifts.
“Our banking and financial sector continues its growth and development trajectory, further cementing its leading position. This reflects the effectiveness of the central bank’s strategies in supporting stability and reinforcing the UAE’s position as a global financial hub,” Saleh said.
The Central Bank of the UAE, which oversees record-high foreign exchange reserves of more than Dh1 trillion ($270 billion) and a monetary base cover ratio of 119 per cent, reaffirmed the strong fundamentals of the UAE’s Dh5.4 trillion banking sector.
The overall stock of liquidity held by UAE banks at the central bank, combined with their net eligible assets for conventional CBUAE operations, reached close to Dh920 billion ($250 billion), of which banks’ reserve balances exceed Dh400 billion ($109 billion).
S&P Global Ratings said liquidity support and regulatory flexibility introduced by the central bank 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.
The rating agency 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.
The Central Bank of the UAE 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. “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,” according to S&P report.
Weather the turbulence
The impact of the US-Iran 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, the report said.
“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.”
The S&P report 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. Other ratings agencies including Fitch have also highlighted continued loan growth and strong deposit inflows as key strengths supporting stability, while international institutions note that the system maintains ample capital and liquidity cushions to absorb potential external shocks.
Moody’s Ratings warned that credit stress would emerge quickly if instability persists, but strong balance sheets, geographic diversification and government support should help preserve credit quality for many rated Gulf issuers. “Smaller, less diversified companies with near-term refinancing needs remain most vulnerable.”
Five key pillars explained
The Financial Institution Resilience Package covers five key pillars allowing banks to access monetary liquidity and provides additional flexibility to utilise excess liquidity and capital buffers to support the UAE economy:
Pillar I — Monetary Policy Measures: Enhanced access to reserve balances up to 30 per cent of the cash reserve requirement and availability of term liquidity facilities in both AED and USD.
Pillar II — Liquidity and Funding Relief: Temporary relief in liquidity and stable funding ratios to provide banks with greater flexibility to support the UAE economy.
Pillar III — Capital Buffer Relief: Temporary release of the Countercyclical Capital Buffer (CCyB) and Capital Conservation Buffer (CCB) to support the UAE economy.
Pillar IV — Credit Risk Management: Providing flexibility to banks to postpone classification of individual and corporate loans for customers affected by the extraordinary circumstances.
Pillar V — Additional Support: In view of the extraordinary circumstances, and considering the aforementioned support, the Central Bank of the UAE affirms that banks should continue to provide the required financing services to support their customers and the national economy.
