ABU DHABI, The Central Bank of the UAE is enhancing its reporting of Non-Performing Loans (NPL) for the UAE banking system to align its methodology with international best practices, in consultation with the International Monetary Fund.
Under its previous reporting methodology the UAE banking sector’s NPL ratio was overstated compared to other jurisdictions, due to the inclusion of interest in suspense.
Accordingly, under the new reporting standard the NPL ratio of the UAE banking system for the year-end 2018 stood at 5.6% (instead of 7.1% under the previous reporting methodology).
For comparative purposes, the Central Bank of the UAE is providing time series reflecting the enhanced NPL ratio methodology covering the last five years.
Furthermore, to provide increased transparency and comparability with other jurisdictions, the CBUAE is also publishing a Net NPL ratio.
The Net NPL ratio excludes specific provisions held by banks against non-performing loans. For the UAE banking system this ratio stood at 1.8% at year-end 2018.
The Net NPL ratio provides a comparison with other banking sectors considering the varying provisioning and write-off policies across different jurisdictions.
These changes will be reflected in the upcoming publications by the Central Bank of the UAE and communication with stakeholders as of the third quarter of 2019
Source: Emirates News Agency