Industry figures play down Middle East conflict impact on financial services

Dubai-based Seya Rahnema and Matthew Escritt of Pinsent Masons were commenting after The National reported comments by Henrik Raber, head of global banking at Standard Chartered in Dubai, and David Manlowe, chief executive of asset management firm Benefit Street Partners (BSP), on Sunday.

According to The National, Raber said Standard Chartered are “positive” about the medium-term outlook in the UAE. He cited the market’s experience in dealing with higher inflation post-Covid and referred to the current “energy shock” as a “short-term spike” that it “just need[s] to get through”.

Manlowe told The National that the conflict “has not diminished” BSPs’ “enthusiasm one bit for the region”.

Earlier this month, governor of the Central Bank of the UAE, Khaled Mohamed Balama, issued a statement which pointed to the “strength” of the UAE’s banking sector and its “robust financial soundness”.

“The UAE’s banking and financial sector continues to maintain very strong levels of capital adequacy and liquidity,” the governor said on 5 March. “The capital adequacy ratio currently stands at 17%, while the Liquidity Coverage Ratio exceeds 146.6%, both significantly above the regulatory thresholds recommended by international supervisory bodies and global financial institutions.”

“In addition, total assets of the UAE banking and financial sector now exceed AED 5.42 trillion (US$1.48 trillion), reflecting the scale, resilience, and strength of financial institutions operating in the country, as well as their capacity to meet obligations and sustain support for economic activity under various conditions. I also reaffirm that the UAE’s banking systems, payment systems, and national financial infrastructure continue to operate with full efficiency and stability. These systems are supported by advanced operational and technological frameworks that ensure the seamless, secure, and uninterrupted functioning of banking and financial services,” he added at the time.

The Board of the Central Bank of the UAE subsequently approved a package of measures “designed to reinforce the stability and resilience of the UAE banking sector in light of exceptional global and regional circumstances”. The preventative measures were welcomed by Pinsent Masons’ Rahnema at the time as giving banks more freedom from regulatory restrictions to ensure they continue lending to businesses that may need to access capital during the period of the conflict.

Credit ratings agencies S&P and Fitch have also this month reported on financial resilience in the Gulf. S&P reiterated its view that the UAE presents a very low credit risk in the long-term and is very well placed to meet short-term commitments, when it gave the state AA/A-1+ credit ratings. Fitch separately said that “Gulf banking systems face few immediate credit risks from the regional conflict,” and that institutions “generally have sound financial metrics, and ample liquidity and capital buffers”, according to a report by Arabian Gulf Business Insight.

Rahnema said: “Even amid elevated regional uncertainty, the core prudential indicators of the UAE banking sector remain a strong source of reassurance. Capital adequacy of around 17% and liquidity coverage ratios above 146% place banks well above international regulatory benchmarks. This strength is reinforced by the credit ratings agencies reaffirming the UAE’s AA/A‑1+ ratings. Together, these factors point to a banking system that is well positioned to absorb shocks while continuing to support economic activity.”

Escritt added: “It is reassuring to see the effectiveness of the UAE’s regulatory response endorsed by both market participants with a long track record in the UAE and major ratings agencies. It inspires confidence in the country's ability to recover rapidly from the challenges it is currently facing.”