UAE lends support to banks as regional conflict continues
The UAE Central Bank has rolled out a resilience package to support the 5.4 trillion-dirham local banking sector and boost liquidity as the ripple effects of the ongoing Iran conflict continues to spread across the region’s financial sector and dent investor sentiment.
The measures permit lenders to access reserve balances of up to 30% of the cash reserve requirement and availability of term liquidity facilities in both dirham and dollar denominations. Banks have been granted temporary relief in liquidity and stable funding ratios for greater flexibility.
The initiative is also offering the temporary release of the countercyclical capital and capital conservation buffers. Banks can also delay classifying retail and corporate customer loans affected by “extraordinary circumstances” as non-performing according to a statement issued Tuesday.
The statement pointed at the liquidity and capital strength of the banking sector, with the overall liquidity held at the central bank and net eligible assets for its operations, totalling close to $250 billion, of which banks’ reserve balances alone exceeding $109 billion.
Furthermore, the central bank, which oversees foreign exchange reserves of more than 270 billion dollars, confirmed the banking sector’s health and payment systems suffered “no material impact”.
The UAE has borne the brunt of Iranian retaliation to the joint US-Israeli onslaught that has led to the death of its Supreme Commander and top Iranian security and political echelon.
The conflict, which has entered its 18th day Wednesday, resulted in damage to the country’s energy, aviation and economic infrastructure. Residential and commercial buildings were also damaged by debris.
The UAE has intercepted and engaged 334 ballistic missiles, 15 cruise missiles and 1,714 unmanned aerial vehicles (UAVs) since the beginning of the conflict on February 28. The conflict has resulted in the deaths of two servicemen and six civilians, with minor to severe injuries to 158 people, according to data supplied by the country’s defence ministry.
الدفاعات الجوية الإماراتية تتعامل مع الصواريخ الباليستية والجوالة والمسيرات الإيرانية.
— وزارة الدفاع |MOD UAE (@modgovae) March 19, 2026
UAE Air Defences engaged Iranian
Ballistic and Cruise Missiles and UAVs Attacks#وزارة_الدفاع #وزارة_الدفاع_الإماراتية#MOD#UAEMinistryOfDefence pic.twitter.com/dDeqo3WTzf
Many banks in the GCC region have activated their business continuity plans, including shifting staff to remote work and reducing the number of branches open, as Iran declared regional lenders as viable targets in response to an attack on an Tehran bank.
Several UAE lenders experience disruptions to their services such as access to mobile apps and online services.
Banks have reportedly not experienced any significant funding outflows, according to S&P Global Ratings.
“We understand that major outflows of foreign or local funding have not yet occurred. That said, if the war persists, it’s possible there could be some flight to quality between banks within the same systems, as well as external or local funding outflows,” the report read.
The rating agency said that the full impact on banks’ asset quality indicators will take time to materialize.
“Overall, we expect some deterioration in banks' financial performance in 2026, the extent of which will depend on the conflict’s duration and impact on local economies.”
