UAE banking sector can absorb rise in bad loans: Fitch
International ratings agency Fitch said the UAE banking sector could absorb a fairly significant increase in bad loans following its recent capital sensitivity test.
The UAE banks overall capitalisation level of 18 per cent of risk-weighted assets provide a substantial buffer, it said.
The UAE Central bank recently launched a new liquidity support facility for the local banks.
Fitch Ratings also affirmed the long-term Issuer Default Ratings and placed the Individual ratings of four local banks on Rating Watch Negative (RWN).
The banks affected are Commercial Bank of Dubai (CBD), Emirates NBD (ENBD), Mashreq, each with an Individual rating of C, and HSBC Bank Middle East, with an Individual rating of B.
Fitch will continue to monitor the situation of all rated UAE banks and expects to resolve these RWN on the Dubai banks over the next two weeks as more information arises.
However, the the review of the RWN could take longer, it said.
Dubai Holding Commercial Operations Group (DHCOG), was revised by Fitch to BB from BBB- on December 2, 2009 and remains on RWN.
In another report on Abu Dhabi, the ratings agency said that Abu Dhabi could preserve its own balance sheet strength and avoid actions that could jeopardise its own creditworthiness.
It said Abu Dhabis considered and so far indirect financial support is in line with the agencys understanding of Abu Dhabis attitude to support.
A conservative attitude to support helps underpin Abu Dhabis AA Long-term foreign currency Issuer Default Rating (IDR) which has a Stable Outlook.
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