UAE Banks Tighten Lending Conditions as Fundamentals Reach 15-Year Highs

UAE commercial banks are adopting more conservative lending standards and building internal capital buffers, even as the sector’s financial fundamentals reach their highest levels in 15 years. The shift represents a strategic pivot toward risk management during a period of record profitability and high liquidity across the national banking system. Shift in Credit Sentiment Recent data indicates that while net interest margins remain elevated, lenders are tightening credit availability for personal loans and small-to-medium enterprise (SME) financing. This trend follows a sustained period of high interest rates, which has bolstered bank earnings but increased the potential for future defaults if the global economic cycle cools. Banks are currently prioritizing the quality of their loan books over aggressive volume growth. The tightening of credit conditions is evidenced by more rigorous documentation requirements and higher credit score thresholds for new borrowers. Despite these stricter measures, the UAE banking system remains highly liquid. Capital adequacy ratios for the nation's major lenders continue to significantly exceed minimum regulatory requirements set by the Central…