CBUAE enhances oversight of UAE banks’ real estate exposures

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CBUAE has developed a novel risk-based methodology to enhance monitoring and supervision of bank real estate exposures. WAM

The Central Bank of the UAE (CBUAE) has developed an enhanced framework to supervise banks’ exposures to the real estate sector.

The new standards cover all types of on-balance-sheet loans and investments, and all off-balance-sheet exposures to the real estate sector. They refine definitions, measurement and supervision, facilitating the adoption of best practices in bank real estate financing and risk management.

The comprehensive standards require banks to review and improve their internal policies to enhance sound underwriting, valuation and general risk management for their real estate exposures.

The new methodology also introduces measurement of these exposures, based on credit risk-weighted assets using the CBUAE’s capital adequacy standards. Banks with higher risk-weighted real estate exposure in their portfolios will be subject to a more extensive supervisory review of their underwriting and risk management practices in this segment.

The standards will take effect from Dec.30, 2021, starting with a one-year observation period, during which banks will be required to enhance their practices to meet the new standards.

The CBUAE will evaluate these standards based on a supervisory review during the observation period.

Khaled Mohamed Balama, Governor of the CBUAE, said, “Banks will continue to play a crucial role in financing real estate and construction, which are vital sectors of the UAE economy.”

“The CBUAE has developed a novel risk-based methodology to enhance monitoring and supervision of bank real estate exposures. These new standards will enhance best practice in real estate financing in the UAE, and facilitate the safety and soundness of our financial system.”

ADGM: Abu Dhabi Global Market (ADGM) has announced its enhanced framework governing auditors, ‘ADGM Auditors’ Framework’, has fully come into effect as of 1st December 2021.

This follows the approval by ADGM’s Board of Directors which was granted in August this year. The framework is administered by the Abu Dhabi Global Market Registration Authority (RA).

Abu Dhabi Global Market enhanced the ADGM Auditors’ Framework for a variety of reasons that include ensuring international equivalence on audit oversight, promoting high quality audits and investor protection, all of which will facilitate continued robust business confidence in Abu Dhabi Global Market and the entities that operate within.

Key changes in the Abu Dhabi Global Market Auditors’ Framework include “Robust registration criteria” all auditors and audit principals will have to meet the criterion before they are granted registration.

“The robust criteria include auditors demonstrating their competence, compliance with international professional and ethical standards, as well as having adequate and appropriate professional indemnity insurance cover.”

The framework also includes “Additional permits” ADGM auditors and audit principals who wish to accept audit engagements of public companies and financial institutions will have to obtain the relevant additional permit from the Registration Authority (RA) at Abu Dhabi Global Market. Additional permits will be granted to those who meet the eligibility criteria and requirements.

It also includes “Improved oversight powers”, the RA will be responsible for monitoring and supervising auditors and audit quality in Abu Dhabi Global Market. The RA will adopt a risk-based approach to its on-site and desktop assessments and annually publish a report on its operational activities.

ADGM Auditors’ Framework offers transition arrangements to existing recognised auditors.

The transition period allows existing Abu Dhabi Global Market auditors and audit principals to re-register under the new framework from 1st December until the auditor’s existing renewal date.

Existing auditors and audit principals are encouraged to re-register early and leave sufficient time for the registration process. The RA’s’ robust registration process for both existing and prospective auditors is likely to take at least four weeks from application to registration. Applicants are reminded to factor this in their plan to ensure there is no gap in the audit services offered to clients.

Dhaher bin Dhaher Al Mheiri, CEO of the ADGM RA, commented, “Abu Dhabi Global Market’s enhanced Auditors’ Framework further strengthens Abu Dhabi Global Market’s position as a robust and sustainable jurisdiction that places importance on investor protection and instilling strong business confidence.

High quality audited financial statements are essential to the integrity of financial markets and the financial ecosystem.

WAM



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