UAE – Mubasher: The board of the Central Bank of the UAE (CBUAE) recently approved a comprehensive financial institution resilience package designed to reinforce the stability and resilience of the UAE banking sector in light of exceptional global and regional circumstances, according to an official statement.
The CBUAE reaffirmed the strong fundamentals of the UAE’s AED 5.4 trillion banking sector, noting that it oversees record-high foreign exchange reserves of more than AED 1 trillion, equivalent to $270 billion, and a monetary base cover ratio of 119%.
Moreover, the overall stock of liquidity held by UAE banks at the CBUAE, combined with their net eligible assets for conventional CBUAE operations, reached close to AED 920 billion, equivalent to $250 billion, of which banks’ reserve balances exceed AED 400 billion that is equivalent to $109 billion.
Key Pillars of Resilience Package
The CBUAE’s financial institution resilience package covers five main pillars allowing banks to access monetary liquidity and provides additional flexibility to utilize excess liquidity and capital buffers to support the UAE economy.
- Monetary Policy Measures, which allows enhanced access to reserve balances up to 30% of the cash reserve requirement and availability of term liquidity facilities in both AED and USD.
- Liquidity and Funding Relief, which is a temporary relief in liquidity and stable funding ratios to provide banks with greater flexibility to support the UAE economy.
- Capital Buffer Relief, which is a temporary release of the Countercyclical Capital Buffer (CCyB) and Capital Conservation Buffer (CCB) to support the UAE economy.
- Credit Risk Management, which offers flexibility to banks to postpone classification of individual and corporate loans for customers affected by the extraordinary circumstances.
- Additional Support, which represents the fifth pillar where in view of the extraordinary circumstances, and considering the aforementioned support, the CBUAE affirms that banks should continue to provide the required financing services to support their customers and the national economy.
Meanwhile, the central bank’s board reiterates its readiness to deploy necessary policy tools to safeguard the stability of the financial system, remaining committed to maintaining and further enhancing the contribution of the UAE’s financial sector to the national vision and its financial sector competitiveness.
Sheikh Mansour bin Zayed Al Nahyan, Vice President, Deputy Prime Minister, Chairman of the Presidential Court, and Chairman of the Board of the CBUAE, stated: “The UAE’s enduring financial and economic strength is rooted in the forward-looking vision of the UAE’s leadership.”
Al Nahyan added: “The CBUAE’s precautionary policies and proactive frameworks have consistently demonstrated their effectiveness in promoting the resilience and preparedness of the financial and banking sector, while ensuring monetary and financial stability.”
He concluded: “These achievements are a testament to the sustained confidence in our system and the global competitiveness of the UAE’s national economy.”
Furthermore, the CBUAE board noted that the country’s financial system has demonstrated resilience during the current extraordinary circumstances affecting the global and regional markets without any material impact on the banking sector’s health and payment systems.
