The UAE Central Bank said it will use new standards to supervise banks’ exposure to the real estate sector.
The bank added in a statement that it will introduce a developed supervisory framework covering “all types of loans and investments in the balance sheet, in addition to all exposures granted to the real estate sector outside the balance sheet.”
He explained that this would require banks to “review and improve their internal policies, with the aim of strengthening loan-granting and evaluation practices and managing general risks in their exposure to the real estate sector.”
With the exception of the current year, the prices of residential units in Dubai have been declining since 2014 due to the increase in supply and weak demand, which forced construction companies to reduce their workers and halt expansion plans, and this also led to a high percentage of bad debts with banks.
And the bank continued, “The banks that have in their loan portfolio a higher risk weighted by the risks of exposures in the real estate sector will be subject to a more comprehensive supervision of their practices related to granting loans and managing risks in this segment.”
The central bank will give the banks a year, during which “the banks will be asked to strengthen their practices to comply with the new standards.”
The Central Bank will evaluate these criteria based on the supervisory review during the monitoring period, which will begin on December 30.