Standard & Poor's ratings services has revised its banking industry country risk assessment (Bicra) on UAE to group '5' from group '4'.

The S&P is also maintaining the economic risk score at '5' and assigning an industry risk score of '5'.

We have reviewed the UAE banking sector under our updated Bicra methodology. Our criteria define the Bicra framework as one 'designed to evaluate and compare global banking systems,' said a statement from S&P.

A Bicra analysis for a country covers rated and unrated financial institutions that take deposits, extend credit, or engage in both activities. A Bicra is scored on a scale from 1 to 10, ranging from lowest-risk banking systems (group '1') to highest-risk (group '10').

The other countries in Bicra group '5' include China, India, Turkey, Poland, and Thailand.

'Our economic risk score of '5' reflects our opinion that UAE has 'low risk' in 'economic resilience', and 'high risk' in 'economic imbalances' and 'credit risk in the economy,' as our criteria define these terms,' the S&P said in its statement.

As one of the world's largest oil exporters, UAE has high household income levels, as its high GDP per capita shows. The economy traditionally generates strong current account surpluses, and UAE typically maintains a large net external asset base.

'This has allowed it to respond to the crisis that began in late 2008 with strong countercyclical policies and support for its financial sector.'

'Political risk is high in UAE, like for other countries in the Gulf region. Our assessment of UAE's economic imbalances reflects the significant drop in the UAE's real estate prices since late 2008, a factor which contributed to the deterioration of asset quality in the system.'

The UAE has the largest banking system in the Gulf region and the market shares of UAE's major banks have been relatively stable over the years.

The three leading banks control about 40 per cent of the UAE system's total assets.-TradeArabia News Service