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How to Evaluate the Level of a Bank Reliability

Article image: How to Evaluate the Level of a Bank Reliability

If you are planning to put a decent amount of money in a bank, the issue of its reliability comes first. It affects the safety and security of your funds, and hence your confidence in the future.

There are numerous criteria that determine the degree of a bank reliability. Let us consider the most important ones.

 

The Main Criteria for Evaluating the level of a Bank Reliability

1. Credit Rating

This is both the easiest and the most efficient way to determine the trustworthiness of a bank. The rating is assigned to UAE banks by the authoritative independent agencies: Fitch Ratings, Moody's, Standard & Poor's. It is denoted by three, two or one letter from A to D.

The most reliable UAE banks hold three AAA ratings. They are followed by AA, A, and then in descending order of reliability: BBB, BB, B, CCC, CC, C, DDD, DD, D. In general, the reliable banks are those holding the rating, which is equal to or more than B. If a financial institution holds a one D rating it means that it has become bankrupt.

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2. Founding Members

Information on founders can be found on the official website of the bank. If it is not clearly specified, or you are told that “it is provided only upon the request” or that “it is a commercial secret”, there is good reason to doubt on the reliability of this financial institution.

The owners of the most reliable financial institutions in the UAE are the investors who possess considerable capital. These are usually the state, profit-making corporations or bank consortia.

3. Volume of Assets

The assets include the property of the bank and the issued loans, securities, cash on hand, investment portfolio. The more assets are, the more extensive the activity of a financial institution is, and therefore, the higher place in the ranking of banks it holds, the more credibility it has.

4. Equity

Different countries have different minimum value of the bank's equity. Besides, this value can vary (usually it moves up). The closer the equity to the minimum is, the higher the probability that the license will be terminated in the case of increase of the mandatory minimum.

5. Age and dynamics of development

Young banks, which were created a few years ago, cannot boast the same degree of reliability as the banking institutions with more than 20 years of experience.

Another important criterion is the dynamics of development. If the bank is ahead of its competitors in terms of the growth rate, it is a positive indicator.

By the way, the UAE banks are considered to be the most reliable financial institutions worldwide.

Do You need to open a banking account? Please contact us and we will help You to make a right choice and undergo the account opening procedure.

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