CBUAE committed to continued economic recovery

Khaled Mohamed Balama, Governor of the Central Bank of the UAE (CBUAE), has affirmed the bank’s assessment of financial stability in the UAE, and the CBUAE’s plans regarding the gradual withdrawal of its extraordinary support measures.

This came during a meeting held recently with the Chief Executive Officers of selected national and foreign banks operating in the UAE, in the presence of Abdulaziz Al-Ghurair, Chairman of the UAE Banks Federation.

Balama said, “Our assessment, confirmed by recent economic data, affirms the UAE economy’s gradual recovery. As we enter the next phase of the post-COVID recovery, there will be less need for extraordinary relief measures. We expect that banks will do their part in supporting our economic recovery and ensure the continued flow of funds to creditworthy retail and corporate borrowers.”

Supported by the ongoing economic recovery, the CBUAE assessed the UAE’s financial system as stable. Liquidity in the banking system and banks’ capital buffers remained adequate. The Governor informed that the CBUAE will continue to closely supervise banks’ asset quality and the adequacy of provisioning.

In view of the gradual increase in economic activity, the CBUAE is starting a gradual and well-calibrated withdrawal of its Targeted Economic Support Scheme (TESS) to avoid restricting credit supply and economic growth. The participants agreed that the TESS programme had been effective in meeting its objective of mitigating the adverse effects of the COVID-19 pandemic on the UAE’s economy.

Fifteen per cent of the UAE banks’ loan portfolio had benefitted from the TESS deferral programme.

The bank also confirmed, that in the short term, it will leave unchanged the temporarily lowered reserve requirements for banks, and the level of the loan-to-value ratio applicable to mortgage loans for first-time home-buyers. The CBUAE has already announced that the loan deferral component of the TESS programme will expire by the end of the 2021, but the CBUAE’s zero cost lending facility may be used to grant new loans until mid-2022.

The Bank announced previously that its regulatory relief measures that allowed banks to maintain lower capital and liquidity buffers will expire by the end of 2021. The CBUAE is closely monitoring economic recovery and loan demand, however, and is looking at extending these measures for a limited period to facilitate a smooth economic recovery.

Under the patronage of Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister, Minister of Presidential Affairs, and Chairman of the Board of Directors of the Central Bank of the UAE (CBUAE), the Central Bank announced recently that it will host the “Future of Finance” conference on 13th and 14th October 2021, as part of the upcoming Expo 2020 Dubai. Aligned with Expo’s theme ‘Connecting Minds and Creating the Future’, the conference will address trends shaping the financial sector by facilitating the exchange of knowledge on the global challenges and opportunities facing the financial industry. It will feature panel discussions focusing on the effect of digital transformation, greening the financial system, co-operation between leading central banks on payments and central bank digital currencies, and Islamic finance.

The conference will include central bank governors, public sector representatives, industry leaders, and heads of financial and technology institutions from around the world.

Participating speakers from the UAE include Abdullah bin Touq Al Marri, Minister of Economy; Ahmed Ali Al Sayegh, Minister of State and Chairman of Abu Dhabi Global Market; Khaled Mohamed Balama, Governor of CBUAE; Abdul Aziz Al Ghurair, Chairman of UAE Banks Federation and Chairman of Mashreq Group; Sheikh Abdullah bin Bayyah, Chairman of the UAE Fatwa Council; Younis Al Khouri, Under-Secretary of the Ministry of Finance; and Aisha Al Abdooli, Acting Assistant Under-Secretary for the Green Development and Climate Change Sector.

While international speakers include Dr. Fahad Ibrahim Alshathri, Deputy Governor for Supervision at the Saudi Central Bank; Benoit Coeure, Head of Bank of International Settlement Innovation Hub; and Chung- Chun Mu, Director General of Digital Currency Research Institute at People’s Bank of China.

Commenting on the conference, Balama said, “Against the backdrop of the UAE’s fifty-year anniversary, as we look towards another five decades of growth and prosperity, the Future of Finance conference comes at an opportune juncture to discuss the trends shaping the financial landscape in the post COVID-19 period.”

WAM