Yesterday, the Central Bank announced a number of measures aimed at supporting the national economy and protecting consumers and companies, within the framework of the World Health Organization's declaration of the "Covid-19" global epidemic.

The bank stated that the measures include a 50 billion dirham financial credit to grant loans and advances at zero cost to banks operating in the country, in addition to 50 billion dirhams that are released from the additional preventive capital of banks.

He stressed that the purpose of the plan is to facilitate the provision of temporary exemption from principal payments and interest on existing loans, to all private sector companies and individual clients affected in the country.

National economy

In detail, the Central Bank adopted a number of measures, in an effort to support the national economy and protect consumers and companies, in the framework of the World Health Organization declaring the "Covid-19" global epidemic.

The targeted financial support plan consists of a credit of up to 50 billion dirhams, allocated from the Central Bank funds to grant loans and advances at zero cost to banks operating in the country, covered by a guarantee, in addition to 50 billion dirhams freed from the additional preventive capital of banks.

Sufficient capitalization

The bank confirmed in a statement yesterday that the state's banking system has sufficient capitalization, and banks maintain additional voluntary capital for the minimum regulatory requirements. The reduction in this protective capital has not been taken into account, for the purposes of calculating the overall size of a targeted comprehensive economic support plan.

Banks are expected to maintain sound lending standards and treat all their customers fairly.

He pointed out that the purpose of the plan is to facilitate the provision of temporary exemption from principal payments and interest on existing loans to all private sector companies and individual clients affected in the state.

Temporary exemption

Banks participating in this directive plan must use the financing to grant temporary exemption to their private sector companies and their individual clients for a period of six months. Many individual and corporate clients have been exposed to the risk of a temporary shortfall in their cash flows due to the outbreak of the "Covid-19" epidemic. The plan aims to address this by providing customer assistance and granting zero-cost financing to banks.

All banks will be allowed to use the equivalent of 60% of the additional protective capital, and the banks designated by the central bank as local banks of systemic importance will be able to use 100% of the additional protective capital planned for them as banks of systemic importance.

The central bank will also reduce the capital amounts that banks must hold against their loans granted to small and medium enterprises, by 15 to 25%. This change in the regulatory framework, which is generally in line with the minimum standards established by the Basel Committee, will facilitate access to SMEs for more financing.

Precautionary measures

He explained that by facilitating the total precautionary measures, the central bank will increase the loan-to-value ratios currently applied to mortgage loans granted to first-time homebuyers, by five percentage points, and this will increase the affordability, without increasing the inherent risk. For the first time buyers will benefit from being required to pay less of their own capital when purchasing a property for the first time.

The central bank will also review the existing limits, which set a maximum ceiling for banks' exposure to the real estate sector, when exposure reaches 20% of the bank loan portfolio (measured by risk-weighted assets), banks will be allowed to increase it to 30%, but they will be required to keep more capital the money.

Moreover, the central bank will adopt new regulations, aimed at bringing about a significant reduction in fees incurred by merchants, when their customers pay by debit or credit cards. The central bank will issue new regulations to set limits on fees imposed by banks on their clients from small and medium enterprises, and stipulates that banks do not require a minimum account balance of more than 10 thousand dirhams.

In addition, the central bank will require all banks to open accounts for SME clients, within a maximum period of two days, provided that the required documents are available, and that the risks are acceptable in light of obligations to counter money laundering and combat terrorist financing.

Guiding guides

The Central Bank will issue guidelines on collateral coverage requests, whereby banks are required to request additional guarantees within a reasonable period of time, before proceeding to liquidate the shares offered as collateral, in conditions where the market is declining, and this would reduce excessive fluctuations in the market, and give investors more Flexibility to act in their best interests.

As of today (March 15, 2020), for a period of six months, the Central Bank will postpone all fees imposed by it on payment services provided to banks operating in the United Arab Emirates, through payment and settlement systems.

The Central Bank continues to monitor the situation closely, and confirms that it is fully prepared to take further measures if necessary.

Adopting a set of measures to enhance confidence in the economy and improve the business environment in the country.

Allowing the banks to use part of the protective capital in new lending and support the economy.

All banks can obtain loans and advances free of cost according to the support plan.

The central bank confirms its firm commitment to link the dirham to the dollar.

Significant reduction in fees incurred by merchants when paying with debit or credit cards.

Provide a temporary waiver of principal and interest payments to the private sector and individuals affected by the epidemic.