The Central Bank of the UAE (CBUAE) injected AED 31 bn (USD 8.4 bn) into the domestic banking system earlier this week, The Banker reports. The injection is designed to offset a sharp drop in liquidity, which had plummeted by more than 40% as of end-February amid ongoing regional hostilities.

How it works: The bulk of the liquidity was channeled through the Contingent Liquidity Ins. Facility (CLIF), which recorded its highest utilization since launch three years ago. The facility allows banks to access CBUAE reserves against eligible collateral for periods of one month or longer, acting as a “preventive support measure” during periods of elevated risk, The Banker quotes Naresh Bilandani, an equity analyst at Jefferies, as saying in a research note published yesterday.

The move usually comes in response to “actual or prospective stress of an exceptional nature, which could be marketwide or idiosyncratic,” Bilandani said.

This isn’t the first intervention from CBUAE: The move comes as the CBUAE has greenlit a five-pillar Financial Institutional Resilience Package to shield the sector from global volatility. The measures provide lenders with immediate flexibility, including increased access to reserves of up to 30%, enhanced AED and USD liquidity, and the ability to dip into capital buffers while delaying loan reclassifications for stressed clients.

The main concern about banks? Real estate exposure

Despite strong system buffers, asset quality risks are building, with Fitch Ratings flagging real estate as a key vulnerability, the agency said in a recent note from Fitch Ratings. The sector “is likely to be the main source of new Stage 3 loans if the conflict is prolonged,” the agency warned.

Concentration risks: While aggregate exposure to corporate real estate declined to 13% of gross loans by late 2025, risk remains concentrated across select lenders, including CBI, which has a concentration of 41% in real estate in its loan book, Sharjah Islamic Bank (29%), and Ajman Bank (28%).

In context: With the war weighing on population inflows and tourism, Fitch expects a market correction that could exceed the previously forecast 15% decline in 2026, posing risks to profitability and asset quality for overexposed banks. This hasn’t fully materialized yet, but a further cooldown is expected to show up in April data, analysts told us recently.

IN CONTEXT- CI Capital had also warned that a prolonged conflict could pressure lenders with heavy real estate exposure, even as UAE banks maintain healthy capital buffers and the CBUAE holds over AED 1 tn in foreign reserves.

Tags: