Moody's said it placed four Dubai banks on review for possible ratings downgrade, due to rising challenges facing the sector, mainly triggered by the emirate's stressed property market and an economic slowdown.

The four affected banks are Emirates Bank International and National Bank of Dubai (which are merging into Emirates NBD), Mashreqbank and Dubai Islamic Bank, Moody's Investors Service said in a statement.

"Moody's anticipates that the pressures facing the UAE banking system will result in rising corporate defaults as well as an increase in delinquencies from retail lending -- especially among unsecured credits," the statement said.

"However, the rating agency acknowledges that the rated banks have responded to the expected deterioration in asset quality by increasing their provisioning levels and improving their Tier 1 capital ratios during the first two quarters of 2009," it said.

"Moody's stress tests of the rated UAE banks' portfolios ...have indicated that the Abu Dhabi-based banks are more resilient," said John Tofarides, lead analyst at Moody's for the UAE banks, in the statement.

"This primarily reflects two factors: (i) their high Tier 1 capital ratios and (ii) lower concentrations of loans and deposits to the more volatile economic conditions prevailing in the emirate of Dubai," he said.

Dubai's once-booming property sector has slowed sharply since last year when the global economic crisis and a drop in oil prices ended an economic boom in the Gulf region. - Reuters