UAE Central Bank Unveils More Measures To Shore Up Banks

This step comes as an additional measure encouraging banks to strengthen the implementation of the TESS and support their impacted customers in overcoming the repercussions of the pandemic

The Board of the Central Bank of the UAE (CBUAE), has decided on additional measures within the Targeted Economic Support Scheme (TESS), launched initially in March 2020 to further enhance the capacity of the banking sector to support the economy.

A press statement issued by the Bank said that these measures consist into reviewing 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.

This step comes as an additional measure encouraging banks to strengthen the implementation of the TESS and support their impacted customers in overcoming the repercussions of COVID-19 pandemic.

The changes affect the Net Stable Funding Ratio that is mandatory for the five largest UAE banks, and the Advances to Stable Resources Ratio, which is applicable to all other banks, including foreign branches.

The purpose of those ratios is to ensure that long-term assets are funded by stable resources of funding. The relaxation of NSFR and ASRR will provide banks with enhanced flexibility in managing their balance sheets.

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 percent threshold, but not lower than 90 percent.