By 
As cross-border trade across the Gulf accelerates at its fastest pace in more than a decade, regional banks face a mounting challenge: freeing up regulatory capital to sustain lending momentum without compromising balance sheet resilience.
This urgent call to action comes from AU Group, speaking at the GTR MENA 2026 conference in Dubai. With geopolitical shifts opening new trade corridors and national diversification strategies driving infrastructure and industrial investment, banks are under pressure to support longer-tenor, higher-complexity transactions while navigating increasingly stringent global capital requirements.
Against this backdrop, capital relief is rapidly becoming one of the most critical—yet under-discussed—tools shaping the region’s financial stability and trade expansion.
The Capital Efficiency Mandate
From “We the UAE 2031” to wider regional industrialization and supply chain localization efforts, Gulf economies are experiencing unprecedented trade dynamism. Yet this growth comes with increasing demand for longer credit terms, complex counterparties, and multi-market exposures—all of which consume substantial regulatory capital.
“Banks across the Middle East are at a turning point. Trade is expanding, opportunities are growing, but capital buffers are not infinite,” said Aurélien Paradis, CEO of AU Group Middle East & Africa.
Aurélien Paradis
“Capital relief is no longer a technical option; it is a strategic imperative for any bank seeking to scale trade finance sustainably while protecting resilience.”
Paradis joins a high-level panel at GTR MENA 2026 examining how capital relief solutions—particularly those supported by credit insurance—are transforming banks’ ability to fuel economic growth without absorbing unsustainable balance sheet strain.
“When structured properly, credit insurance frees up regulatory capital, strengthens balance sheet ratios, and enables banks to redeploy capacity into new lending without compromising credit discipline or risk appetite,” he added.
How Capital Relief Works
Capital relief allows banks to reduce risk-weighted assets (RWA) by transferring credit risk to highly rated third parties, most commonly through credit insurance or synthetic risk transfer structures.
This approach has already transformed banking practices in mature markets. In Europe, where capital relief structures are widely adopted, banks using credit insurance have been able to release 20–30% of regulatory capital tied to insured portfolios—capacity that can be channeled directly into new lending, particularly to SMEs.
For Gulf banks aiming to increase trade finance capacity—especially across emerging corridors in Africa and Asia—such tools offer a transparent, regulator-recognized path to:
- Strengthen capital ratios
- Support larger and longer-tenor transactions
- Expand risk appetite across new markets
- Navigate global Basel III / Basel IV dynamics
- Maintain operational agility amid macro volatility
Credit insurance sourced from Lloyd’s markets and other highly rated insurers is drawing growing interest, given its track record in providing credible, recognized risk transfer mechanisms for trade assets.
A Strategic Shift for Credit Insurance
Paradis emphasized that the role of credit insurance is shifting rapidly:
“We see banks in the Middle East moving from using credit insurance as a defensive risk mitigation tool, to embracing it as a proactive capital strategy instrument. That shift will fundamentally reshape how trade finance grows in the region over the next decade.”
AU Group’s participation in GTR MENA 2026 underscores its commitment to equipping regional lenders with independent analytics, structured risk transfer expertise, and market-tested solutions aligned with long-term economic objectives across the Middle East and Africa.
