Banks across the UAE could be forced to raise as much as US$9.8 billion (Dh35.99bn) of new capital to cope with the fallout from the Dubai World debt restructuring and a growing tide of loan defaults, the IMF says.
If Dubai World decided to offer its creditors only 50 cents on the dollar, the UAE Government and other shareholders might be forced to inject as much as $9.8bn into a total of 10 banks, the IMF said. There was no indication that Dubai World would propose such a haircut to creditors, however.
The IMF is not the first institution to suggest that the UAE's banks might need Government support.
Not everyone agrees with the IMF's view, however. Sultan al Suwaidi, the Governor of the Central Bank, said early last month there was no need to inject additional funds because banks were sufficiently capitalised.
Some analysts in the UAE and at Moody's Investors Service, the ratings agency, agree with Mr al Suwaidi.
The chief differences between those who believe the banks need more money and those who do not stem from the range of views in the market on capital adequacy ratios, or the amount of cash a bank needs to hold in relation to its loans.
Capital adequacy ratio indicates an institution's financial strength, or its ability to absorb financial shocks. It is considered a useful guide in showing whether a bank can sustain further hits to its balance sheet or needs to increase its capital base.
The IMF says banks may need even higher capital levels - up to 14 per cent - to buffer them against losses on loans to Dubai World and other borrowers. Others stick with the 11 per cent current legal minimum in the UAE.
Opinions also vary on the exact exposure of UAE banks to the $26bn of debt that Dubai World is attempting to restructure, how much of that will in fact be restructured, how much other government-related groups such as Dubai Holding owe the banks and how far the property market will fall.
"The discrepancies arise from different assumptions," said John Tofarides, an analyst at Moody's in Dubai. He argues that none of the 13 UAE banks that Moody's rates requires additional capital to remain above the current minimum 7 per cent Tier 1 ratio. This would hold true even if banks had to write off 40 per cent on their Dubai World exposures, he said.
"Others may not confine their assumed loan losses to Dubai World," Mr Tofarides said.
The ratings agency warned, however, that debt at other government-related entities could pose trouble.
Local banks are widely estimated to account for 45 per cent, or about $10bn, of the $26bn of debt that Dubai World is seeking to restructure. But some, including Moody's, estimate the local banks could account for as much $15bn.
Other government-related entities, such as Dubai Holding, also have tens of billions of dirhams of debt.
"Dubai banks are exposed to other government-related issuers that may come under stress. Similar haircuts to other Dubai Government-owned businesses, and possibly the private sector as well, could have serious repercussions," Mr Tofarides warned in a research note.
He added that large loan losses would hurt profits for this year and that a haircut "could harm the ability of banks (especially Dubai-based banks) to tap the capital markets in a cost-effective manner without federal guarantees".
UAE banks reported some of their largest-ever quarterly losses in the October-to-December period, and they more than doubled annual provisions for bad loans after sharp falls in property prices and the financial troubles of two Saudi conglomerates hurt the asset quality of their books.
In autumn, the Central Bank told banks to increase their capital adequacy ratio to 8 per cent for Tier 1 capital and to 12 per cent for overall capital by June of this year. However, the Ministry of Finance has warned banks it will conduct stress tests if their Tier 1 capital falls below 11 per cent. It could require them to convert Tier 2 capital deposited by the Ministry of Finance into Tier 1 capital securities.
Tier 1 capital can absorb losses without a bank being required to cease trading, while Tier 2 can absorb losses in case of a winding up and so provides a lesser degree of protection to depositors.
UAE banks have high overall capital ratios by international standards. By contrast, the Basel Accord recommends that banks be required to set aside 8 per cent of their risk-weighted assets, with Tier 1 contributing half of that.
uharnischfeger@thenational.ae
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
The specs: 2018 Jaguar E-Pace First Edition
Price, base / as tested: Dh186,480 / Dh252,735
Engine: 2.0-litre four-cylinder
Power: 246hp @ 5,500rpm
Torque: 365Nm @ 1,200rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.7L / 100km
What can you do?
Document everything immediately; including dates, times, locations and witnesses
Seek professional advice from a legal expert
You can report an incident to HR or an immediate supervisor
You can use the Ministry of Human Resources and Emiratisation’s dedicated hotline
In criminal cases, you can contact the police for additional support
Timeline
1947
Ferrari’s road-car company is formed and its first badged car, the 125 S, rolls off the assembly line
1962
250 GTO is unveiled
1969
Fiat becomes a Ferrari shareholder, acquiring 50 per cent of the company
1972
The Fiorano circuit, Ferrari’s racetrack for development and testing, opens
1976
First automatic Ferrari, the 400 Automatic, is made
1987
F40 launched
1988
Enzo Ferrari dies; Fiat expands its stake in the company to 90 per cent
2002
The Enzo model is announced
2010
Ferrari World opens in Abu Dhabi
2011
First four-wheel drive Ferrari, the FF, is unveiled
2013
LaFerrari, the first Ferrari hybrid, arrives
2014
Fiat Chrysler announces the split of Ferrari from the parent company
2015
Ferrari launches on Wall Street
2017
812 Superfast unveiled; Ferrari celebrates its 70th anniversary
Reputation
Taylor Swift
(Big Machine Records)
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Globalization and its Discontents Revisited
Joseph E. Stiglitz
W. W. Norton & Company
The%20specs
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The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Profile
Company: Justmop.com
Date started: December 2015
Founders: Kerem Kuyucu and Cagatay Ozcan
Sector: Technology and home services
Based: Jumeirah Lake Towers, Dubai
Size: 55 employees and 100,000 cleaning requests a month
Funding: The company’s investors include Collective Spark, Faith Capital Holding, Oak Capital, VentureFriends, and 500 Startups.
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
More from Rashmee Roshan Lall
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
COMPANY%20PROFILE
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Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
T10 Cricket League
Sharjah Cricket Stadium
December 14- 17
6pm, Opening ceremony, followed by:
Bengal Tigers v Kerala Kings
Maratha Arabians v Pakhtoons
Tickets available online at q-tickets.com/t10
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
More on Quran memorisation:
SPECS
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Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
The specs: 2018 Mercedes-Benz E 300 Cabriolet
Price, base / as tested: Dh275,250 / Dh328,465
Engine: 2.0-litre four-cylinder
Power: 245hp @ 5,500rpm
Torque: 370Nm @ 1,300rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.0L / 100km
THE%20SPECS
%3Cp%3EBattery%3A%2060kW%20lithium-ion%20phosphate%3Cbr%3EPower%3A%20Up%20to%20201bhp%3Cbr%3E0%20to%20100kph%3A%207.3%20seconds%3Cbr%3ERange%3A%20418km%3Cbr%3EPrice%3A%20From%20Dh149%2C900%3Cbr%3EAvailable%3A%20Now%3C%2Fp%3E%0A
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
Profile box
Founders: Michele Ferrario, Nino Ulsamer and Freddy Lim
Started: established in 2016 and launched in July 2017
Based: Singapore, with offices in the UAE, Malaysia, Hong Kong, Thailand
Sector: FinTech, wealth management
Initial investment: $500,000 in seed round 1 in 2016; $2.2m in seed round 2 in 2017; $5m in series A round in 2018; $12m in series B round in 2019; $16m in series C round in 2020 and $25m in series D round in 2021
Current staff: more than 160 employees
Stage: series D
Investors: EightRoads Ventures, Square Peg Capital, Sequoia Capital India
UK%20record%20temperature
%3Cp%3E38.7C%20(101.7F)%20set%20in%20Cambridge%20in%202019%3C%2Fp%3E%0A
Omar Yabroudi's factfile
Born: October 20, 1989, Sharjah
Education: Bachelor of Science and Football, Liverpool John Moores University
2010: Accrington Stanley FC, internship
2010-2012: Crystal Palace, performance analyst with U-18 academy
2012-2015: Barnet FC, first-team performance analyst/head of recruitment
2015-2017: Nottingham Forest, head of recruitment
2018-present: Crystal Palace, player recruitment manager