Emirates Islamic Bank to convert deposits into capital

BANK SECURITY: Emirates Islamic Bank has announced plans to shore up its capital base in the face of mounting loan defaults.

Emirates Islamic Bank said on Wednesday it would convert federal government deposits into regulatory capital as part of a plan to enable banks to bolster their capital as they face a rise in provisions.

Emirates Islamic, a unit of Emirates NBD, is the latest bank in the UAE seeking to strengthen its base of Tier 2 capital as loan defaults mount, and they take provisions for potential bad loans to come.

The UAE finance ministry set up a AED70bn ($19.06bn) facility last year to deposit money into banks.

It has so far deposited AED50bn of that cash, and it is now enabling banks in the second-largest Arab economy to convert those deposits into Tier 2 capital as they strive to improve their capital adequacy ratios.

Shareholders of Emirates Islamic approved the conversion and authorised the board to carry it out, the bank said in a statement on the bourse website, without giving details about the amount it would convert or when it would happen.

Emirates NBD was the first to say it would convert $1.72bn of the deposits it received into Tier 2 capital.

Earlier this month, Dubai's Mashreq and National Bank of Abu Dhabi said they would do the same, with NBAD intending to convert $1.53bn of deposits into capital.

Banks across the oil-producing Gulf have written down the value of investments and taken provisions against an expected rise in bad loans after the region's economic boom came to an end late last year as oil prices collapsed. (Reuters)

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM