«Central» procedures provide an umbrella to protect banking

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Experts: step timeliness to maintain the regional leadership and anticipate «Basel 3»

«Central» procedures provide an umbrella to protect banking

the source:

• ■ Abu Dhabi - Abdel Fattah Montasser

Date:March 6, 2017

 

Provided the Central Bank of the umbrella of a new protection for the banking sector of the UAE, guarantees to be protected from any risks or shocks by strengthening the solvency of the sector and provide accurate and put the central bank standards after a thorough review of the requirements of the regulatory capital of banks operating in the country, in order to create a system in line with the new Basel system standards «Basel 3» on the framework of capital in order to enhance system robustness of the banking sector and its ability to endurance.

Sources, the central bank confirmed that the new system included requirements to raise capital in terms of quality and quantity together, also included the introduction of reserve capital and apply the new rate of leverage will also change the definition of capital, with a focus on the paid-in capital and retained earnings and reserves disclosed.

The Financial and Banking experts for «economic statement», that the new system of capital adequacy issued by the Central Bank and entered into force last month, is a correct step in the right timing to keep the UAE banking sector on the regional leadership and pre-empt the schedule for the application of the criteria of the Committee on the new Basel system «Basel 3 »on the framework of capital system, noting that under the« Basel 3 »the timeframe for the full implementation of the new system of capital is the end of the year 2018.

Experts said that the central bank relied on a consultative phase with the banks during the past two years about the application of the system, indicating that the central bank is reviewing and improving its regulations for risk management and internal control and financial reporting and external audit to verify that financial institutions systematically control and risk management in line with leading international practices.

Anticipate standards

Saleh Omar Abdullah, Director of the Emirates Institute for Banking and Financial Studies in Abu Dhabi, said it is clear that the central bank in its efforts to develop a regulatory regimes seek to adopt the consistency and transparency in the development, application and implementation of systems for financial institutions licensed, where he began working in the development of a library for the final versions of all classified systems on the basis of the sector and the area of risk while continuing issuance of new regulations and put them into practice and will be the withdrawal of all existing circulars and notifications that are no longer applicable.

He stressed that the UAE banking sector is moving in the right direction towards achieving the standards «Basel 3» which will become mandatory for banks all over the world by the end of 2019, indicating that the central bank had commissioned long ago a team of experts to work on speeding up to meet the requirements of the «Basel 3 »and that the UAE banking sector is keen to pre-empt the new Basel standards program. He added that the Central Bank and banks operating in the country apply the latest banking supervision systems in line with the new standards adopted by the Committee of Basel 2 and Basel 3 according to the best international practices, pointing out that the regulatory reform package issued by the body of the Basel address the weaknesses in the banking sector before the financial crisis and outlines procedures for a group that aims to increase the banks' resistance to the regime and the global banking crisis, which covers the new global standard called Basel III risks related to the banks as well as those risks related to the banking system as a whole.

Bond market

He felt the need to establish a structured local market for bonds backed by Dirhams to promote the national economy, pointing out that the ES «Basel 3» will provide an incentive even indirectly to the development of government bonds and corporate bonds on the grounds that one of the requirements of the so-called «the assets of Ready banks to liquidate» require the possession of banks a certain percentage of their assets in this type of bond, stressing that it is for the banks, the issuance of bonds, medium and long term will help her convenience between the maturity of liabilities on the one hand and assets on the other hand so that the banks not only in the future to grant long-term loans versus deposits and short-term customers.

He pointed out that the new Basel Committee standards «Basel 3» place restrictions on bank financing for small and medium enterprises, calling to remedy this.

For his part, the economic advisor Mohammed Saeed Mohammed virtual believes that all banks and national banks have made great efforts to achieve the requirements of «Basel 3» and exceeded the index «Basel 3» on the banking sector, the level of the ratio required.

Bulwark

He explained that after he was forced organizers of the Basel Committee on Banking Supervision to take a set of new rules to increase capital by more than 3-fold capital, which is imperative for banks to keep it as a reserve in the midst of efforts to push banks toward more conservative positions and force them to take shelter behind the bulwark size the largest in the face of potential losses came new rules, two years after the collapse of «Lehman Brothers» Fkvt the Basel Committee to take caution to cope with fluctuations and financial challenges associated with economic cycles and reached to the need to increase the capital of banks and banks of all kinds capital adequacy ratio to the level of 10.5% to a new index released it «Basel 3» instead of 8% in the «Basel 2 index».

According to the methods of modern banking risk measurement, the «rules precautionary» stipulated by the Basel Committee is among the most important methods used to measure the degree of risk, especially in the banking world.

He pointed out that the new Basel accord, which is the cornerstone of the banking reform process calls for banks to hold larger capital as much as a reserve position to cope with any shocks.