Dec. 6 (Bloomberg) -- The United Arab Emirates’ banking system will come under pressure as the global economic crisis and Abu Dhabi’s slowdown undermine asset quality and restrict liquidity, Fitch Ratings said.
Banks in the country will “face new headwinds” brought on by the “fragile” real-estate industry and problems at Dubai government-linked entities and U.A.E. companies, the ratings company said in a report today.
“The U.A.E. operating environment is not immune from global issues and this threatens the recovery in the banking system,” the report said, “Fitch is particularly expecting several key economic sectors such as trade, tourism and services to be negatively impacted.”
Fitch said it expects banks’ earnings to decline because of low business volumes and new central bank rules on retail lending. The main challenge is the banks’ ability to raise long- term funding, which has become “more costly, especially for Dubai-based banks” as liquidity in global markets declines, it said.
--Editors: Steve Bailey, Jon Menon
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