Latest news with #Damak
Khaleej Times
12-03-2025
- Business
- Khaleej Times
UAE banks, realty resilient as Russia-Ukraine ceasefire looms
The UAE banking sector will remain resilient amid potential Russia-Ukraine ceasefire and a subsequent likely softening of the country's residential real estate market, say analysts at S&P Global Ratings. Despite the significant influx of Russian nationals and capital into the UAE since the war began in 2022, S&P analysts suggest a ceasefire would not prompt an immediate reversal of these flows. Mohamed Damak, senior director and primary credit analyst at S&P Global, noted that ongoing political and economic uncertainties in Russia will likely encourage individuals and businesses to maintain financial footholds in the UAE. 'The UAE's business-friendly regulations, tax advantages, and stable environment remain compelling,' Damak stated in a report, which highlights the UAE's economic stability, robust liquidity buffers, and diversified non-oil growth as key pillars of resilience. A potential ceasefire following the US-initiated ongoing talks in Saudi Arabia is unlikely to trigger immediate Russian exodus, they said. Russian buyers have been pivotal in Dubai's real estate boom, ranking among the top foreign investors since 2021. Property prices in the UAE surged by double digits annually over this period, driven by high demand and limited supply. While a ceasefire could ease geopolitical pressures, S&P emphasises that the UAE's appeal as a safe haven and investment hub will endure. The UAE's broader economic health further insulates its financial sector. S&P projects real GDP growth at 3.4 per cent in 2024, accelerating to an average of 4.4 per cent between 2025 and 2027. This outlook hinges on a gradual easing of Opec+ oil production cuts and sustained expansion in non-oil sectors like tourism, logistics, and technology. With oil prices expected to stabilise near $70 per barrel, the nation's fiscal buffers and diversification efforts are poised to mitigate external shocks. A critical focus of S&P's analysis is the UAE banking system's liquidity strength. While deposit inflows from Russian entities surged post-2022 — exceeding historical norms in 2023 and 2024 — the sector's liquid assets stood at three times the value of these inflows as of November 2024. 'Even if deposit outflows occur, banks have more than enough liquidity to manage without destabilising operations,' Damak explained. He added that many Russians may retain UAE accounts for asset security, limiting net withdrawals. Though residential property markets show early signs of cooling, S&P downplays systemic risks. Direct bank lending to construction and real estate accounts for 14.4 per cent of total loans, but high demand and scarce supply — particularly in Dubai — are expected to cushion price declines. Notably, over 80 per cent of UAE real estate transactions are cash-based, reducing mortgage-related vulnerabilities. 'Population growth, investor appetite, and constrained supply underpin this market,' Damak said. 'Even if some Russian investors divest, absorption capacity remains strong.' Rated developers are similarly bolstered by healthy cash reserves, manageable debt, and solid revenue pipelines, ensuring resilience amid market fluctuations. Over the past three years, Russia migrant inflows, among other factors, have supported real estate demand in the UAE and the overall economic activity. 'We would not anticipate a significant disruption to the residential real estate sector, even if we were to see significant property divestments by Russians, given continuous strong demand and population growth. Dubai has witnessed an annual double-digit value increase since 2021, leading to significant capital gains for real estate owners. The market remains supportive as demand is still outpacing supply, a situation that we expect will continue in the next 12-18 months,' S&P analysts noted. They said high yields and capital gains along with asset security could be another reason for Russians to stay invested in the UAE. 'In our base case, we expect UAE GDP growth to accelerate from 2025 and as such see limited risks to banks' asset quality indicators. We also note that most real estate transactions are not financed by mortgages, which reduces banks' exposure to real estate price risks. 'We also believe rated real estate developers will remain resilient, even if their operating environment weakened, thanks to solid revenue backlogs, reduced leverage, strong cash flow generation, and good liquidity buffers. Overall, we expect the UAE banking system will continue to display strong asset quality indicators and that the UAE central bank's recent change to the provisioning rules will further increase non-performing loan coverage ratios — which were close to 100 per cent in 2024 — to levels comparable with some regional peers,' S&P analysts said.
Arabian Business
05-03-2025
- Business
- Arabian Business
Nod for stablecoins USDC and EURC to accelerate UAE's emergence as a crypto powerhouse, say experts
Dubai Financial Services Authority's (DFSA) move to approve Circle Internet Group's stablecoins USD Coin (USDC) and Euro Coin (EURC) as recognised crypto tokens within the Dubai International Financial Centre (DIFC) will be a game changer for crypto adoption in the UAE as it offers businesses efficient, compliant tools for digital finance, sector experts said. The move will also potentially accelerate the region's emergence as a crypto powerhouse, besides posing a challenge to Tether's USDT dominance, leading to reshaping the over $200 billion stablecoin market globally, they said. The US-based stablecoins market leader Circle said with the DFSA approval last week – February 24 – financial institutions and fintechs operating in the DIFC can integrate USDC and EURC into their digital asset services, payments, treasury management, and a range of other financial applications. USDC is a cryptocurrency stablecoin pegged to the US dollar, while EURC is a euro-backed stablecoin. The DFSA's decision will enable over 6,000 DIFC firms to use these stablecoins for payments and treasury functions legally. 'The approval of USDC and EURC as the first stablecoins under Dubai's new crypto framework positions Dubai as a blockchain innovation hub,' Ryan Lee, Chief Analyst at Bitget Research, told Arabian Business. 'For crypto adoption, it's a game-changer in the UAE – already third globally in adoption,' he said. Lee said this move enhances trust in stablecoins amid regional volatility, besides boosting Circle's competitive stance against Tether's USDT dominance. Dr. Mohamed Damak, Managing Director and Financial Institutions Sector Lead, S&P Global Ratings, said they expect that the role of stablecoins will continue to evolve and could eventually lead to more integration between traditional finance and decentralised finance. 'For example, [there could be more integration] in the case of cross-border payments, the tokenisation of real-world assets (RWA), or the issuance of digital bonds,' Damak told Arabian Business. DIFC's stablecoin integration move Damak said the approval allows financial institutions and fintech firms in the DIFC to use USDC and EURC in their services for payment, treasury management, etc., potentially resulting in an increase of the adoption of USDC and EURC by DIFC-based entities. He, however, pointed out that while EURC is regulated in Europe under MiCA (Market in Crypto Assets regulation), there is no regulatory framework at the federal level in the US, though the momentum around that is building with three proposals under consideration currently. In an Executive Order in January, President Donald Trump outlined the new US administration's focus on developing privately issued regulated stablecoins, rather than a central bank digital currency (CBDC). 'In our view, once a regulation is approved in the US, the use of stablecoins in regulated financial market applications such as digital bonds and tokenised money market funds has the potential to scale. 'In this context, the implementation of the necessary regulations, including the Virtual Assets Regulatory Authority (VARA), the regulation of stablecoins by the central bank and by DFSA in DIFC and FSRA in ADGM and crypto-friendly free zones could enhance market conditions for investors,' the S&P Global Ratings senior executive said. Karl Naïm, Global Head of BD & GM Middle East at XBTO Middle East, a leading digital asset firm, said though the DFSA decision is highly significant, it is pertinent to understand that this is not a UAE-wide approval. 'The decision is a characteristically measured approach to financial innovation and creates a regulatory sandbox within DIFC's boundaries where financial institutions can confidently integrate regulated stablecoins into specific operations,' Naïm told Arabian Business. 'What the DFSA is doing is essentially creating a test case for stablecoin regulation that will likely influence how other UAE jurisdictions approach these assets,' he said. Move to boost DIFC's competitive position The XBTO Middle East senior executive said the DFSA's decision will enhance the DIFC's competitive position in the increasingly contested market for digital asset regulation. 'This also has a positive knock-on effect for both Dubai and the UAE,' he said. Naïm said without committing the entire emirate to a particular regulatory approach, the financial free zone demonstrates its capacity to integrate digital assets into a sophisticated regulatory framework. 'This precision is a favourable contrast with many jurisdictions, where the status quo remains grappling with fundamental questions of stablecoin classification. 'This approach also complements Dubai's broader crypto regulatory architecture, including VARA's oversight outside financial free zones and the central bank's developing framework for payment tokens and an AED-backed stablecoin,' he said. As for the wider use of USDC and EURC, Naïm said a measured adoption curve appears more probable than any immediate surge, with business necessity rather than regulatory permission the most important factor. 'Financial institutions will likely look to implement these regulated stablecoins where they solve specific problems, with treasury operations and cross-border settlements the most obvious use cases where the efficiency gains justify the implementation costs, and compliance risks are most manageable,' he said.
Biz Bahrain
06-02-2025
- Business
- Biz Bahrain
Sukuk Market Will Likely Have More Time To Adopt AAOIFI Standard 62, Report Says
At the beginning of February, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held a couple of public hearings on Sharia Standard 62. In S&P Global Ratings' view, this standard will shape the future of the sukuk market. (See 'Sukuk Brief: More Time To Adopt AAOIFI Standard 62') The AAOIFI will likely give issuers more time to implement Sharia Standard 62. In its public hearing over the weekend, the AAOIFI mentioned that it is likely to approve Standard 62 in 2025, and that issuers will likely have between one and three years to implement the new requirements, depending on the AAOIFI's final decision. 'Depending on the final timeline that the AAOIFI gives the market, this development could give sukuk structurers more time to develop structures that strike a balance between complying with the new requirements and making the sukuk attractive to fixed-income investors, if this is still possible,' said S&P Global Ratings credit analyst Mohamed Damak. 'However, the adoption of the standard could cause a decline in sukuk issuance,' Mr. Damak added. If adopted as proposed, Sharia Standard 62 will, in our view, result in the sukuk market shifting away from structures in which the sukuk sponsors' contractual obligations underpin their repayments, to structures in which the underlying assets have a more prominent role. Notwithstanding the fact that issuers will have more time to adjust to the new requirements, investors will likely face new risks relating to asset performance and value. We continue to believe that if the standard is adopted as proposed, some investors and issuers may choose alternatives to the sukuk market, as issuing sukuk might become more onerous from a risk/reward perspective. This could also encourage some adopters to transition away from the standards if their ability to tap the capital markets is significantly restricted.
