The UAE central bank approves a “temporary” easing of liquidity and bank financing rules

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Abu Dhabi – Mubasher: The Central Bank of the United Arab Emirates decided to facilitate liquidity rules and finance banks “temporarily”, as part of the measures supporting individuals and institutions in light of the repercussions of the spread of Corona.

Today, the Board of Directors of the Central Bank of the United Arab Emirates 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, according to the Emirates News Agency, WAM.

These measures are represented in reviewing the current ceilings of two precautionary ratios: “Ratio of net stable sources of financing” and “ratio of loans and advances to stable sources of funds” by temporarily easing the structural liquidity position at banks.

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.

The UAE central bank said that the mandatory limits for each of the two rates will be eased temporarily by 10 percentage points, and banks, with regard to the “net stable sources of financing” ratio, will be allowed to reduce the ratio to less than 100 percent, but not less than 90 percent.

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 percent, but not to exceed 110 percent, and these measures will be effective until December 31, 2021.

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 under the economic support plan should be treated as stable financing with a weight of 50%, regardless of the duration Merit.

Weight determines the extent to which sources of financing can be considered stable, in order to qualify for financing long-term assets.

Abdul Hamid Muhammad Saeed, Governor of the Central Bank of the United Arab Emirates, said that the aim of the move is to facilitate the injection of more liquidity from banks into the economy, and that this measure would urge banks to implement the previously approved economic support plan, which has a total value of 256 billion dirhams.

He continued, and this temporary easing of structural liquidity requirements is complementary to 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.

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