The Central Bank has delayed the implementation of three of its flagship bank reforms agreeing with many commercial lenders' requests for a review of policy after concerted lobbying campaigns.
Deadlines to comply with new limits on exposure to government entities, guidelines on banking sector liquidity and a nationwide upgrade of security features on debit cards have all been rolled back.
The Central Bank has agreed to extend by six months a year-end deadline to switch all debit cards to chip and pin, a spokesman for the Emirates Banks Association said.
The Central Bank has also postponed the implementation of a cap on lending to governments and their commercial holding companies which had come into effect on September 30. At the time, at least three banks were in breach of the new limit.
"The Central Bank board of directors reviewed banks' feedback on the amendments to the large exposures regulation, and decided to postpone implementation of the regulation until all items of the regulation are reviewed with banks," it said in a statement.
The regulations had initially been proposed by the IMF as a means of preventing a repeat of the Dubai World crisis of 2009, where cascading restructurings led the Central Bank to intervene and support lenders. As the banks were given only six months to comply, however, the limits slowed corporate lending.
The Central Bank had previously refused to budge despite at least three big banks declaring themselves in breach of the limit.
Of the three - NBAD, Emirates NBD and Noor Islamic Bank - only NBAD said it had obtained an extension. "We perceive the regulation as positive, but with respect to the government-related entities, it could take a bit more time," said Timucin Engin, a financial analyst at Standard & Poor's. "Particularly given the absence of a highly developed and liquid local debt capital market which can accommodate these exposures."
Expectations were that bank lending would become a diminished source of funding for UAE government entities, who would increase their reliance on bond markets, said Jaap Meijer, a financial analyst at Arqaam Capital.
"We expect banks to present plans to gradually reduce single party exposures and for government-related entities and federal governments to tap the bond markets rather than use bank credit. Given reduced credit spreads we don't expect major issues," he said.
The Central Bank said that it was postponing implementation of liquidity regulations pending further discussion with banks, intended to put the UAE financial sector on track to comply with the Basel III capital requirements.
The Central Bank said its board had "decided to postpone implementation until details of the requirements of the regulation are agreed," the statement added.
The postponement of the liquidity regulations surprised analysts, who had expected that they would pose little problem for local banks, which are better capitalised than their rivals in the United States, Europe or Japan.
"Most of the banks are in compliance or able to be compliant," Mr Engin added. "It's not a very challenging requirement for most of the banks to comply with."
The Central Bank has become highly active in regulating UAE lenders since the global financial crisis revealed some of the weaknesses in the local banking sector.
Regulations on the standardisation of bad debts, bank provisions and fees on consumer lending were all issued during the past few years. In the case of the retail lending provisions, banks successfully lobbied to delay their implementation by one month.
The Central Bank also set out its budget for the year ahead, expecting revenues of Dh3.8 billion (US$1.03bn) and net profits of Dh3bn.