The implementation of the Large Exposure Regulations, that came into effect in September, has been postponed “until all items of the regulations are reviewed with banks,” the Abu Dhabi-based central bank said in an e-mailed statement today. New liquidity rules scheduled for Jan. 1 will also be delayed.
The postponements come after Emirates NBD PJSC (EMIRATES), the U.A.E.’s biggest bank by assets, and second-ranked National Bank of Abu Dhabi PJSC (NBAD) did not meet the September deadline to comply with the new lending rule. The central bank said April 4 that banks cannot lend more than 100 percent of their capital to local governments and the same to state-related entities as part of a plan to reduce so-called concentration risk.
Emirates NBD’s exposure to sovereign and quasi-sovereign clients is 192 percent of regulatory capital, while that of National Bank of Abu Dhabi is 199 percent, according to estimates from Deutsche Bank AG in April. National Bank of Abu Dhabi said in October it was in talks with the central bank to exclude its portfolio of state-owned company bonds from the cap on lending to government and state-related companies.
Under separate rules announced in July, banks were required to comply with four so-called liquidity ratios to help them withstand market disruptions and avoid a concentration of debt payments. The first of these were to be applied from Jan. 1 when banks were expected to hold 10 percent of their liabilities in high-quality liquid assets such as cash, central bank certificates of deposits and federal government bonds.
The board of the Central Bank of the U.A.E. “reviewed banks’ comments on the liquidity regulations in terms of the financial instruments accepted as liquidity tools, their limits, implementation date and submitting reports” before announcing the postponement, according to today’s statement.
The central bank said the country’s banking indicators are considered positive and that banks are insulated from the current turmoil in financial markets. The central bank also estimates to earn a profit of 3 billion dirhams ($817 million) in 2013 compared to 3.7 billion dirhams this year.
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