The central bank is working on a new system setting liquidity requirements for banks as part of plans to strengthen their capital base and upgrade their performance, the central bank has said.

The country’s 23 national banks and 28 foreign units already have a strong capital base, with their adequacy soaring to one of its highest levels of 20.8 per cent at the end of 2010, far higher than the 12 per cent floor set by the central bank in June last year.

Releasing its quarterly bulletin this week, the central bank said the high capital adequacy would help UAE banks, which have the largest asset base in the Arab region, to offset any bad loans by allocating more provisions from their resources.

“In this respect, it is important to note that the central bank is working to implement the Basel 3 adequacy requirements adopted after the 2008 global fiscal crisis,” it said.

“The central bank is also working on rules allowing banks to enhance their liquidity…considering the fact that UAE banks already enjoy high adequacy, the central bank is concentrating on devising a new system for liquidity requirements in the banking system.”

The report showed banks are pushing ahead with boosting their capital in line with central bank instructions, with their combined shareholders equity reaching around Dh256 billion, the highest in the Arab world.

Assets totaled nearly Dh1,605 billion at the end of 2010 compared with Dh1,584 billion at the end of September last year. Deposits maintained their climb to reach nearly Dh1,049 billion at the end of 2010 compared with Dh1,013 billion at the end of September and about Dh982 billion at the end of 2009.

Lending slipped by 1.3 per cent to Dh1,031 billion at the end of 2010 from Dh1,038 billion at the end of September but there was a slight growth compared to its level at the end of 2009, when credit stood at around Dh1,017 billion, the figures showed.