UAE Central Bank Unveils Further Measure To Boost Banks' Capacity

The Central Bank of the UAE has announced a further measure that it says will further enhance the capacity of the banking sector to support the economy, and give banks “enhanced flexibility in managing their balance sheets”.

The measures, which come under the Central Bank’s Targeted Economic Support Scheme (TESS) that was announced in March this year, will review the existing thresholds of two prudential ratios: the Net Stable Funding Ratio (NSFR) and the Advances to Stable Resources Ratio (ASRR) “by temporarily relaxing the requirements for the structural liquidity position of banks”.

The central bank said the additional measure will encourage banks to strengthen the implementation of the TESS and support their impacted customers in overcoming the repercussions of Covid-19 pandemic.

The ratios ensure that long-term assets are funded by stable resources of funding.

The mandatory threshold will be temporarily relaxed by 10 percentage points for both ratios. For the NSFR ratio, banks will be allowed to go below the 100 per cent threshold, but not lower than 90 per cent. For the ASRR ratio, banks will be allowed to go above the 100 per cent threshold, but not higher than 110 per cent.

These measures will be effective until 31st December, 2021.

“The relaxation of the two structural liquidity ratios aims to further facilitate the flow of funds from banks into the economy,” said Abdulhamid Saeed, Governor of the Central Bank of the UAE.

“This measure will support the implementation of the already adopted TESS measures worth AED256 billion. The temporary relaxation of NSFR and ASRR will supplement the other measures CBUAE has taken under the TESS to mitigate the impact of the Covid-19 pandemic on private corporates, small and medium-sized enterprises and individuals."