With the aim of enhancing the capacity and resilience of the banking sector and supporting affected customers to confront "Covid-19"
The Central Bank approves additional measures within the comprehensive economic support plan
The Central Bank aims to ensure that long-term assets are financed with stable financing sources. Archive
Abdul Hamid Muhammad Saeed: "Facilitating the injection of more liquidity from banks into the economy, and urging banks to implement the support plan."
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The Central Bank's Board of Directors approved additional measures within the targeted comprehensive economic support plan, which was previously launched in March 2020, which aims to enhance the capacity and flexibility of the banking sector to support the economy.
Affected dealers
In a statement yesterday, the Central Bank stated that these measures consist in reviewing the current ceilings of two precautionary ratios: “The ratio of net stable sources of financing” and “the ratio of loans and advances to stable sources of funds”, through temporary easing, to set structural liquidity. At the banks.
The bank explained that this measure comes as an additional step to encourage banks to enhance their implementation of the economic support plan, and to support affected dealers to face the repercussions of the "Covid-19" epidemic.
He continued: “These changes affect the (ratio of net stable sources of financing), which is mandatory for the five major banks in the UAE, and (the ratio of loans and advances to stable sources of funds), which apply to all other banks, including branches of foreign banks operating in Country".
Flexibility of banks
The Central Bank stressed that the objective 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 “the ratio of loans and advances to stable sources of funds” will enhance the flexibility of banks in managing their budgets. Generality.
According to the Central Bank, the mandatory limits for each of the two ratios will be - temporarily - eased by 10 percentage points, while banks will be allowed, with regard to the "net stable sources of financing" ratio, to reduce the ratio to less than 100%, but not less than 90%. .
As for the “ratio of loans and advances to stable sources of funds,” banks will be allowed to raise the prescribed ratio to above 100%, but not to exceed 110%. These measures will be effective until December 31, 2021.
Stable financing
The Central Bank clarified that for the purposes of calculating the ratios of "net stable sources of financing" and "loans and advances to stable sources of funds", the zero-cost facilities granted by the central bank must be treated under the economic support plan as stable financing with a weight of 50%, regardless of Regardless of the maturity period. The weight determines the extent to which funding sources can be considered stable, in order to qualify for financing long-term assets.
Liquidity injection
The Governor of the UAE Central Bank, Abdul Hamid Muhammad Saeed, said that “easing the structural liquidity ratios aims to facilitate the injection of more liquidity from banks into the economy, and this measure would encourage banks to implement the previously approved economic support plan, whose total value is 256 billion dirhams ».
He stressed that this temporary easing of structural liquidity requirements is complementary to other measures taken by the Central Bank, as part of the economic support plan, to mitigate the impact of the "Covid-19" epidemic on private sector companies, small and medium enterprises and individuals.