16
ANNUAL REPORT 2015
BANKING & MONETARY DEVELOPMENTS
only half that registered by M1 and less than
half that of M2. This lower rate of growth may
be directly ascribed to a contraction during the
year of Government deposits – itself a direct
result of Government withdrawals in the face of
reduced revenues from oil.
Assets
Total assets of banks operating in the UAE rose
by 7.4 per cent in 2015, reaching AED 2.47
trillion by the end of the year. Behind this uplift
was a 7.8 per cent increase in credit, which
rose to AED 1.49 trillion. Total banks reserves
constituting reserve requirements, current
accounts of banks and certificates of deposits
including Islamic certificates of deposits held
by banks, increased to 308.1 billion compared
to 282.7 billion in 2014 and 268.4 billion
in 2013.
In 2015 Islamic banks’ share of total assets
increased to 19 per cent of total banking assets,
up from 17.6 per cent in 2014, rising from AED
405 billion to AED 464 billion. Their financing
rose from 20.8 per cent to 22.2 per cent of
total domestic credit, up from AED 266 billion in
2014 to AED 307 billion in 2015. Although there
were some signs of a liquidity squeeze in 2015,
the banking system in the UAE remains highly
liquid with a liquid assets ratio at end-2015 of
17.4 per cent (end-2014, 15.67 per cent) and
a lending to stable resources ratio of 86.9 per
cent at end-2015 compared to 85.2 per cent
in 2014. The increase in the liquid assets ratio
appears to be a result of some banks raising
their account balances at the Central Bank and
their holdings of Central Bank CDs to bring their
own liquid assets ratio into line with the Central
Bank threshold of 10 per cent.
Deposits
Total deposits increased to AED 1,471.6 billion in
2015, a slight increase on 2014 which reached
AED 1,421.3 billion, itself a solid increase on
2013 figures of AED 1,278.1.
By the end of the fourth quarter of 2015,
total deposits of resident and non-resident
customers with banks operating in the UAE also
increased by 3.5 per cent, reaching AED 1.47
trillion, compared to the AED 1.42 trillion at the
end of the fourth quarter of 2014.
Resident deposits increased by 2.6 per cent,
reaching AED 1.30 trillion, compared to the AED
1.27 trillion at the end of the fourth quarter of
2014. Non-resident deposits also increased
by 11.4 per cent, reaching AED 171.5 billion,
compared to the AED 154 billion at the end of
2014. The increase in non-resident deposits
reflects UAE’s continuing status as a ‘safe
haven’ in the region.
Resident Government Deposits declined by AED
30 billion during 2015, falling to AED 158.8 billion
at the end of the year, a drop of 15.9 per cent.
Capital and Reserves
Banks in the UAE remain highly capitalised with
the capital adequacy ratio of the sector rising
fractionally from 18.2 per cent in 2014 to 18.3
per cent in 2015, of which Tier 1 capital rose
to 16.6 per cent in 2015 from 16.2 per cent in
2014. Both figures remain above the minimum
requirements set by the Central Bank of 12 per
cent and eight per cent respectively. Capital
adequacy ratios measure the amount of a
bank’s capital expressed as a percentage of its
risk weighted credit exposures. A high capital
adequacy ratio provides protection to depositors
and promotes the stability and efficiency of the
financial system of an economy.
Aggregate capital and reserves of banks
operating in the UAE increased from AED 282.7
billion at the end of 2014 to AED 308.1 billion
at end-2015. Capital and reserves increased by
nine per cent during 2015.
Banking Sector Developments
As the corporate sector structure in the UAE
is characterised by large Government-related
entities (GREs) and family groups, compliance
by banks with the loan concentration
limits for GREs and local Governments is
challenging and will need to continue to be
monitored, including the planned transition
paths for banks exceeding the limits. Further
developing domestic debt markets would
reduce the reliance on external funding and
bank lending, helping banks to comply with
