UAE launches support programme for country’s banks

The Central Bank of the United Arab Emirates today (March 18) announced a package of “proactive” measures to support commercial lenders during the ongoing conflict in the Middle East.

It stressed that the country’s banks remained well-capitalised and that its own reserves, amounting to more than 1 trillion dirhams ($272 billion), were at a record high. Commercial lenders held around 920 billion dirhams ($250 billion) at the central bank. Around 400 billion dirhams of this was in cash, with the rest comprising “eligible assets for conventional [central bank] operations”.

The central bank also outlined four specific measures it was launching. 

The first would involve enabling lenders to access “up to 30% of the cash reserve requirement” of their balances at the central bank. Term liquidity facilities, denominated in both dirhams and dollars, would also be made available to lenders as part of the measure.

The second would involve a “temporary relief” in liquidity and stable funding ratios, with the aim of ensuring banks could continue lending to businesses and individuals in the UAE.

The third would comprise a temporary release of the counter-cyclical capital buffer and the capital conservation buffer. The former had been set to 0.5% and the latter to 2.5% of Common Equity Tier 1 capital. The central bank said it hoped that releasing these buffers would provide support to the economy.

The fourth change would give banks the flexibility to postpone the “classification of individual and corporate loans” for customers affected by the conflict.

The central bank included a fifth “pillar” in the support package, which it called “additional support”.

“In view of the extraordinary circumstances, and considering the aforementioned support, the central bank affirms that banks should continue to provide the required financing services to support their customers and the national economy,” it explained.

Mansour bin Zayed, the UAE’s vice-president, was quoted in the central bank’s statement as having said that the institution’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”.