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UAE Banking Sector - Assignment Example

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Date Table of contents UAE Banking Sector………………………………………………… page 2 Introduction:……………………………………………………………. page 2 Importance of Banking Sector in UAE…………………………………………
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Download file to see previous pages Page 3 Find the ratio of Housing Loans/ Housing Debt in UAE…………………….. page 4 What are the components of housing loans in UAE…………………………… page 4 What are the consequences of not paying the housing loans?...................... page 5 Analysis and Valuation……………………………………………………. Page 6 Current banking policy regarding real estate exposure in UAE …………... page 6 Stress testing…………………………………………………………………………. Page 7 Recommendations and Conclusion:……………………………………………… page 8 Works Cited………………………………………………………………… Page 9 UAE Banking Sector Introduction: Importance of Banking Sector in UAE In the UAE economy banks exist as either the local banks (21 banks) or the foreign banks (25 banks). The roles of the banks are significant in the development of both the economy and the lives of the people as they play significant roles in the main sectors of the economy (Low 2012 pg 33-5). The banks play major roles in the community development apart from being loan and credit instruments in the economy. In the total Arab banking the UAE holds 11.55 of the total Assets. This makes the banking sector in the UAE the biggest beneficiary of the strong economic growth in the UAE (Terterov 2006 pg 275). The banking assets stand at over AED 750,597,000,000 due to the strong growth in assets experienced. By the end of the year 2005, the consolidated assets had recorded a growth of 41.9% a value of AED 638.01bn. This makes the bank second after Saudi Arabia in terms of Assets. According to the last economic report in the UAE, GDP has a record growth of 25.6% (AED 485.5 bn) with the real GDP recorded at a growth of 8.2% (AED 357.6bn). The real estate and business services sector contributed to the GDP growth by AED 35,920mn while the financial sector contributed by 28,426mn (Parker 2007 pg 82-8). Concentration of Banks in UAE The banking system in the UAE is mainly of two categories, the local or national and the foreign. There are a total of 46 banks operating in the UAE currently according to the report. Among them 21 are local while 25 are foreign. The foreign banks are restricted from operating more than eight branches while all the 21 local banks are all listed in the Abu Dhabi Securities Market (ADSM) and Dubai Financial Market (DFM). UAE has the second highest number of banks in the GCC countries after Bahrain (Parker 2007 pg 64). With the anticipated growth in the real estate sector, this figure is likely to grow resulting in a lot of mergers and acquisitions of the monetary institutions. This will result from a lot of demand for loans and a lot of money that needs depositing hence a boom in the banking industry (Farah 2009 pg 67-9). Importance of real estate in UAE Using the available data, the per capita household debt went up in the UAE due to a rise in real estate borrowing. The most recent recorded debt per household stands at $12,000 with the household debt to household income stood at a highest 10% (Low 2012 pg 48-50). This percentage of household debt in the UAE provides a cushion to support consumption in the event there is rising consumption expenditure. This is very high as compared to those from the other segment economies like the G20 which stand at below 7% in most of the countries within that economy bracket (Parker 2007 pg 127). ...Download file to see next pagesRead More
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