What Central Bank move means for economy
BANK THRESHOLDS WILL BE TEMPORARILY RELAXED BY 10 PERCENTAGE POINTS
Bank thresholds will be relaxed by 10 percentage points temporarily
The Board of the Central Bank of the UAE (CBUAE) has decided on additional measures within the Targeted Economic Support Scheme (TESS), launched initially in March 2020, to further enhance the capacity of the banking sector to support the economy.
These measures include 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.
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 relaxation of the two structural liquidity ratios aims to further facilitate the flow of funds from banks into the economy. This measure will support the implementation of the already adopted TESS measures worth Dh256 billion. 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,” said Abdul Hamid M. Saeed, Governor of the Central Bank of the UAE.
Easing liquidity
The CBUAE has been proactive in making liquidity available to the banking system through a range of measures such as zero cost funding, low cost funding and relaxed regulatory capital limits and liquidity rules.
A total of Dh256 billion stimulus announced by the CBUAE includes a liquidity relief tool of Dh50 billion offered through banks to eligible customers who
wish to apply for a deferment.
The total amounts of relief measures added up to Dh256 billion, consisting of Dh50 billion capital buffer relief, Dh50 billion zero cost funding support facility to banks in exchange for targeted relief to their retail and corporate customers affected by Covid-19 pandemic, Dh95 billion liquidity buffer relief, and reduction by half the reserve requirements on demand deposits for all banks from 14 per cent to 7 per cent, adding Dh61 billion liquidity support.
It comes as an additional measure encouraging banks to strengthen the implementation of the TESS and support impacted customers.