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Arabian Submit Employees
Although the financial and monetary measures by the GCC banking authorities helped to offset unfavorable stability sheet results from virus containment measures, relaxed regulatory and prudential measures might have obscured deterioration in asset high quality and led to increased risk-taking by banks on loans the place danger classification was deferred or decreased, IMF mentioned in a sectoral report.
The help measures helped to mitigate penalties of the dual shocks to the GCC economies, keep away from misery amongst quickly affected debtors, and guarantee liquidity within the banking system. As new infections have elevated in 2021 and a few public well being measures have been re-introduced, GCC nations have prolonged many help measures into 2021, together with moratoriums on mortgage repayments
The pandemic and collapse in oil costs in 2020 created a twin shock for the GCC economies. To fight and comprise the pandemic, nations imposed public well being measures together with closure of nonessential companies, social distancing necessities, and border restrictions, which have been eased later in 2020. These measures helped to comprise the well being disaster, however they negatively affected financial exercise, leading to recessions, with non-oil actual GDP contracting by about 4 p.c in 2020.
Annual credit score progress in contact-intensive commerce and companies sectors additionally decelerated from a mean of 15 p.c in 2018–19 to eight p.c in 2020. Total credit score progress within the GCC was about 6 p.c in 2020 which was in keeping with the credit score progress in Ems.
GCC banking techniques stay well-capitalized, however profitability and asset high quality have declined. Systemwide capital ranges remained robust in 2020, above 17 p.c in all GCC nations and rising in all nations besides Bahrain as a number of banks issued further capital bonds. Nevertheless, the financial recession led to a decline in asset high quality and profitability within the majority of GCC banking techniques.
NPLs elevated in all GCC nations, with various levels, besides Bahrain. Return on property declined, falling the least in Qatar by 0.2 share factors and probably the most within the UAE by 0.9 share factors. Web earnings of the most important 5 banks in every nation declined by 30 p.c from a 12 months in the past, reflecting increased provisions for mortgage losses which elevated by about 70 p.c in 2020 as banks constructing their buffers in opposition to potential deterioration in asset high quality and withdrawal of coverage help measures. The systemwide provisions protection adjustments within the GCC nations are heterogeneous as in a choice of Ems.
Additionally revealed on Medium.
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