The guidance will lower the systemwide transparency of banks asset quality
UAE central bank’s new guidelines to banks to mitigate coronavirus risk will support the economy amid the outbreak, but will diminish transparency, rating agency Moody’s has revealed.
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On 1 March, the UAE central bank advised banks and finance companies to implement measures to mitigate the economic effects of the global coronavirus outbreak. The measures include re-scheduling loan contracts, temporary deferrals on monthly loan payments, and reducing fees and commissions for affected customers.
“The guidance will support the economy amid the coronavirus outbreak and contain contingent liability risk for the government by preventing potential liquidity challenges from turning into solvency issues for some UAE private sector and government-related entities,” Mik Kabeya, AVP-Analyst at Moody’s investor’s service said.
“For banks, however, the guidance is credit negative because it will lower systemwide transparency of banks’ asset quality if sustained over the long term,” he added.
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