UAE central bank further eases liquidity measures for lenders

UAE central bank further eases liquidity measures for lenders
The UAE government in March launched the $69.707 million Targeted Economic Support Scheme to help companies and individuals affected by the coronavirus pandemic. (AFP)
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Updated 09 August 2020

UAE central bank further eases liquidity measures for lenders

UAE central bank further eases liquidity measures for lenders

DUBAI: UAE monetary authorities further eased liquidity measures for the country’s banks, enabling them to free up more cash to lend to companies and individuals affected by the coronavirus pandemic.

The UAE government in March launched the $69.707 billion Targeted Economic Support Scheme (TESS), which includes $13.615 billion provided by the central bank via collateralized loans at zero cost to all banks operating in the country.

Monetary authorities are “reviewing the existing thresholds of two prudential ratios: the Net Stable Funding Ratio (NSFR) and the Advances to Stable Resources Ratio (ASRR) by temporarily relaxing the requirements for the structural liquidity position of banks,” a statement from the UAE Central Bank said, as reported by state news agency WAM.

“This step comes as an additional measure encouraging banks to strengthen the implementation of the TESS and support their impacted customers in overcoming the repercussions of COVID-19 pandemic, the statement added.

For the NSFR, mandatory for the five largest UAE banks, lenders were allowed to go below the 100 percent threshold, but not lower than 90 percent, while ASRRs could go beyond 100 percent but not higher than 110 percent.

The purposal of these ratios is to ensure that long-term assets are funded by stable resources of funding, and their relaxation means banks will have more flexibility in managing their balance sheets.

“The relaxation of the two structural liquidity ratios aims to further facilitate the flow of funds from banks into the economy,” UAE central bank governor Abdulhamid M. Saeed said.

“The temporary relaxation of NSFR and ASRR will supplement the other measures CBUAE has taken under the TESS to mitigate the impact of the COVID-19 pandemic on private corporates, small and medium-sized enterprises and individuals.”

UAE banks have accessed about 87.2 percent – or $11.872 billion – of the Dh50 billion TESS support provided by the central bank as of July while 9,527 small and medium enterprises and more than 260,600 individuals have benefited from the scheme.