The Central Bank has issued a draft of the proposed regulatory framework for banks' exposure to the real estate sector, for consultation. This framework has been prepared in line with the Central Bank's ongoing efforts to develop its regulatory systems, in conjunction with a comprehensive assessment of the situation, and third party validation by external international experts.
The proposed regulatory framework is aimed primarily at enhancing financial stability by reformulating regulatory measures aimed at banks' exposure to the real estate sector. These improved measures are also expected to provide more flexibility in lending to the real estate sector, while emphasizing that banks with high exposure to the real estate sector, beyond the prescribed limit, will be subject to additional regulatory requirements. In addition, by imposing an irreversible backstop, the proposed measures will help to avoid excessive exposure to the real estate sector and encourage banks to maintain diversified assets.
The Central Bank will endeavor to complement the proposed framework with its risk-based supervision methodology to ensure continuous and consistent application of regulatory measures and appropriate risk management standards across all banking institutions. The bank has invited banks to provide feedback on the proposed framework through the Emirates Banks Union by 31 October.