S&P views economic, industry risks in UAE’s banking sector as stable

S&P views economic, industry risks in UAE’s banking sector as stable

S&P Global Ratings has classified the UAE's banking sector in group '5' under its Banking Industry Country Risk Assessment (BICRA).After the pandemic started, the UAE Central Bank (CBUAE) implemented a Targeted Economic Support Scheme (TESS), which helped ease the pressure on corporate issuers and small and midsize enterprises. However, the scheme did not reduce credit risk on the banking system's balance sheet, according to S&P's report issued on Sunday.“The scheme included a provision that allows banks not to classify deferred exposures as Stage 2 and Stage 3. Rather, banks have classified deferrals into two groups: Group 1 (exposures to clients that are temporarily and mildly impacted); and Group 2 (exposures to clients that are significantly impacted and could see potential stage migrations) and disclosed the information, which we view as positive. At year-end 2020, 12 percent of the top 10 banks' exposures were classified as Group 1 and 2 percent as Group 2,” credit analyst Puneet Tuli said in the report.The ratings agency has assessed the trend in economic risks in the country as stable. “We expect the residential real estate sector will remain under pressure for at least another year because of continuous oversupply, while demand-driven weaknesses will hamper the