Most banks hit 11% Tier 1 target as ENBD issues Dh4bn debt to ICD

Most UAE banks have achieved the 11 per cent Tier 1 ratio prescribed by the UAE Central Bank, senior banking sources said yesterday following Emirates NBD's announcement that it has exceeded the target through issuance of Dh4 billion debt securities to Investment Corporation of Dubai (ICD), which has about 56 per cent shareholding in the lender.

Five Abu Dhabi banks earlier this year received Tier 1 infusions from the government to the tune of Dh16bn.

"Other banks have seen asset growth slow down in the past few months, making them comfortable in terms of capital adequacy," said a banker.

With yesterday's issuance, ENBD's overall capital ratio, including Tier 2, has crossed 17 per cent, the bank said in a statement.

The securities have a fixed coupon rate of 6.45 per cent for the first five years before it converts to a floating rate. The Central Bank has confirmed Tier 1 capital status for these securities for capital adequacy purposes, said ENBD.

The increase in Tier 1 ratio has helped the bank comply with the Central Bank requirement that banks must achieve a minimum Tier 1 capital ratio of 11 per cent by June 30, 2009.

The banks are required to raise the Tier 1 ratio to 12 per cent by June 30, 2010.

Prior to this, banks were required to maintain a minimum overall capital adequacy ratio of 11 per cent where the Tier 2 capital cannot exceed two thirds of Tier 1 capital.

As of December 31, 2008, ENBD's Tier 1 capital adequacy ratio was at 9.4 per cent, whereas the overall ratio was 11.4 per cent.