The Central Bank allocates 100 billion dirhams to a comprehensive economic support plan to contain the consequences of "Corona"

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

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 that are released from the additional protective capital of the banks.

The country's banking system has sufficient capitalization and banks maintain additional voluntary capital for minimum regulatory requirements. The reduction in this preventive 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 of their customers fairly.

The purpose of the plan is to facilitate the provision of temporary exemption from principal payments and interest on outstanding loans to all private sector companies and individual affected clients in the country.

Banks participating in this directive plan should use the financing to grant temporary exemption to their private sector clients and individual customers, for a period of 6 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 about 15-25%. 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.

By facilitating the total precautionary measures, the central bank will increase loan-to-value ratios, currently applied to mortgage loans granted to first-time homebuyers, by five percentage points, and this increases affordability, without increasing the inherent risk. 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 ceiling for banks' exposure to the real estate sector. When the 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 hold more capital.

Moreover, the central bank will adopt new regulations designed to bring about a significant reduction in fees that merchants incur 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 oblige 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.

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 embarking on the liquidation of 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 interests.

As of March 15, 2020, for a period of 6 months, the Central Bank will postpone all fees that it imposes 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.