By: Mahmoud Gamal

Abu Dhabi – Mubasher: Banks operating in the UAE had raised the volume of their investments in debt instruments on a year-on-year basis in January, according to the recent data by the UAE Central Bank.  

Banks hiked their investments by 9% or AED 16.8 billion to AED 206.1 billion ($56.1 billion) by the end of January 2018 from AED 189.3 billion ($51.5 billion) in the same month a year earlier.

Month-on-month, UAE banks’ investments in bonds decreased 0.3% or by AED 700 million from AED 206.8 million.

Debt investment reasons

Banks are constantly trying to diversify their investment portfolios, that is why they invest in fixed income options as the interest from these debt instruments help them confront the low oil prices, which in turn had impacted many economic sectors, according to economic analyst Mohammed Al-Zafairi.

Lenders are also seeking to increase their investments in instruments like bonds as part of their application of Basel III requirements, Al-Zafairi stated.

Basel III standards protect the banking sector and ensure its stability. They will be officially applied by the Central Bank of the UAE in 2019. The requirements entail higher liquidity and hedging policies, and banks are required to maintain a large capital base.

Stocks

Investments by UAE banks in stocks, however, have declined by 10% to AED 11 billion in January from AED 12.2 billion in the same period of 2017, data by the Central Bank of the UAE showed.

On a monthly basis, banks’ investments in stocks also fell by 2.6% from AED 11.3 billion in December.

Translated by: Nada Adel Sobhi