CBUAE's 2024 Financial Stability Report Highlights Banking Sector Resilience And Economic Growth

The Central Bank of the United Arab Emirates (CBUAE) has released its 2024 Financial Stability Report. This report provides a detailed evaluation of the stability within the financial system and developments across various sectors amidst rising global challenges. The UAE banking sector remains robust, supported by strong capital and liquidity buffers, improved asset quality, and ongoing growth. Economic fundamentals, prudent policies, and effective risk management have kept financial stability risks largely contained.

In 2024, the UAE's financial system demonstrated resilience and stability. A significant development was the operationalisation of the UAE Financial Stability Council, led by H.H. Sheikh Mansour bin Zayed Al Nahyan. This initiative enhanced coordination among stakeholders, activated systemic risk oversight, and facilitated timely policy responses to emerging risks. The council plays a crucial role in assessing risks and ensuring coordinated actions.

The UAE's real GDP grew by 4 percent in 2024, driven by momentum in the non-oil sector, which is vital for economic diversification. The overall GDP growth outlook remains positive for the coming years, with projections of 4.4 percent in 2025 and 5.4 percent in 2026. This growth underscores the nation's economic resilience and diversification efforts.

In line with international best practices, CBUAE strengthened its regulatory frameworks in 2024 by implementing new macroprudential tools and enhancing cybersecurity requirements. It also advanced sustainable finance initiatives and expanded climate change risk assessments. These measures aim to bolster the financial system's resilience against global risks.

The comprehensive stress tests conducted by CBUAE confirmed that UAE banks can absorb macroeconomic shocks while maintaining high levels of capital and liquidity beyond minimum requirements. These tests highlight the banking sector's ability to provide credit facilities even under adverse scenarios, showcasing its resilience amid global uncertainties.

The non-bank financial institutions (NBFIs) sector achieved notable results in 2024. The insurance sector remained resilient with a solvency position that supported substantial growth of 21.4 percent, bringing total gross written premiums to AED64.8 billion. This growth reinforced policyholders' rights while finance companies maintained adequate capitalisation with improved liquidity levels.

Digital Transformation Initiatives

Digital transformation accelerated in 2024 with increased adoption rates of FinTech and digital payments, expansion of banking services, and integration of artificial intelligence and data analytics. The CBUAE continued developing national payment infrastructure through initiatives like "Jaywan" Domestic Card Scheme and "Aani" Instant Payment Platform.

Khaled Mohamed Balama, Governor of CBUAE, stated: "The UAE maintained strong economic and financial conditions in 2024 despite growing economic challenges and increasing global risks." He emphasised their commitment to achieving leadership vision through developing regulatory frameworks to ensure sustainable resilience.

The report anticipates a positive outlook for the UAE's financial system due to robust economic fundamentals, prudent management practices, and CBUAE’s efforts towards innovation and transparency. These factors are expected to support continued resilience within the financial system.

With inputs from WAM