Central Bank unveils new measures to boost lenders’ ability to help customers
The UAE Central Bank will relax two liquidity requirements within the Targeted Economic Support Scheme to boost the capacity of banks to support companies and people affected by the Covid-19 crisis.
The regulator said yesterday that it will review the thresholds of the net stable funding ratio (NSFR) and the advances-to-stable resources ratio (ASRR).
It plans to “temporarily relax” the mandatory thresholds for key ratios and the measures will remain effective until the end of next year.
Banks will be allowed to go below the 100 per cent NSFR threshold but not lower than 90 per cent, the Central Bank said. It will also allow lenders to go above the 100 per cent ASRR threshold but not exceed 110 per cent.
“This step comes as an additional measure encouraging banks to strengthen the implementation of Tess and support their [affected] customers in overcoming the repercussions of Covid-19 pandemic,” the regulator said.
The Central Bank introduced Tess in March as it unveiled a Dh100 billion stimulus package to back companies and people affected by restrictions to curb the spread of the coronavirus. This included Dh50bn in zero-cost collateralised loans and a loosening of the capital buffers of banks, increasing their ability to lend.
Further easing of capital and liquidity buffers has since increased the size of the stimulus to Dh256bn.
As of last month, 260,000 people and 9,527 small and medium-sized enterprises had availed themselves of the interest-free loans under Tess to help them cope with the slowdown caused by the pandemic.
SMEs, the backbone of the country’s economy, benefited from loans worth Dh4.1bn by the end of last month, accounting for 9.3 per cent of the amount disbursed.
Individual clients have received support worth Dh3.2bn from banks, according to Central Bank data.
The regulator said the new measures affect the NSFR, which is mandatory for the five largest UAE banks, and the ASRR, which applies to all other banks in the country, including foreign branches.
“The relaxation of the two structural liquidity ratios aims to further facilitate the flow of funds from banks into the economy,” said Central Bank governor Abdulhamid Saeed.
“The temporary relaxation of NSFR and ASRR will supplement the other measures the Central Bank has taken under Tess to mitigate the impact of the Covid-19 pandemic on private [companies], small and medium-sized enterprises and individuals.”
The purpose of the two ratios is to ensure that long-term assets are backed by stable funding resources. Relaxing them will provide banks with more flexibility to manage their balance sheets, the regulator said.
To calculate the two ratios, the Central Bank’s Zero Cost Funding Facility under Tess should be treated as stable funding with a 50 per cent weight, irrespective of its maturity, it said.
The weight determines the extent to which funding sources are considered as stable, in order to be eligible to fund long-term assets.
The relaxation of the two ratios aims to further facilitate the flow of funds from banks into the economy ABDULHAMID SAEED UAE Central Bank governor