The Board of Directors of the United Arab Emirates Central Bank approved additional measures within the targeted comprehensive economic support plan that was previously launched in March 2020, which aims to enhance the capacity and flexibility of the banking sector to support the economy.
These measures are represented in reviewing the current ceilings of two prudential ratios: “the ratio of net stable sources of financing” and “the ratio of loans and advances to stable sources of funds” by temporarily easing the structural liquidity position at banks.
This measure comes as an additional step to encourage banks to enhance their implementation of the economic support plan and support affected customers to face the repercussions of the Covid-19 epidemic. These changes affect the "stable net sources of financing ratio", which is mandatory for the five largest banks in the UAE, and the "ratio of loans and advances to stable sources of funds" that applies to all other banks, including branches of foreign banks operating in the country.
The aim of these ratios is to ensure that long-term assets are financed by stable sources of financing. Facilitating the “ratio of net stable sources of financing” and “ratio of loans and advances to stable sources of funds” would enhance the flexibility of banks in managing their balance sheets.
The Governor of the Central Bank of the United Arab Emirates, Abdul Hamid Muhammad Saeed, stated, “The easing of the structural liquidity ratio aims to facilitate the injection of more liquidity from banks into the economy, and this measure would urge banks to implement the previously approved economic support plan, which amounts to a total value of 256. One billion dirhams This temporary easing of structural liquidity requirements complements other measures taken by the Central Bank within the economic support plan to mitigate the impact of the Covid-19 epidemic on private sector companies, small and medium enterprises and individuals.