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Covid: UAE Central Bank to extend pandemic relief to banking sector until June 2022

Measures will facilitate post-Covid recovery of the local economy

The UAE Central Bank on Saturday extended some of its support measures announced during the Covid-19 pandemic for another six months to boost new lending and financing and also expedite the economic recovery.

The regulator extended banks’ capital buffers and liquidity and stable funding requirements until June 30, 2022, under the Targeted Economic Support Scheme (Tess) to aid balance and sustained recovery in the banking sector and as well the overall economy of the country.

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“As the recovery is gaining momentum, the Central Bank has adjusted the Tess, replacing measures designed to mitigate the immediate negative effects of the pandemic with targeted steps to support the economic recovery,” said Khaled Mohamed Balama, governor of the Central Bank of the UAE.

The capital buffer measures include temporary lowering of the capital conservation buffer and the capital buffer for “systemically-important” domestic banks. While liquidity measures cover temporary prudential relief on the liquidity coverage ratio, eligible liquid assets ratio, net stable funding ratio and advances to stable resources ratio.

Since the outbreak of the pandemic in early 2020, the UAE has provided a Dh388 billion stimulus package to support banks, consumers and other sectors to overcome challenges related to the credit crunch. This also includes Dh50 billion funds provided to banks to extend support to retail and corporate customers affected by the coronavirus pandemic.

In April 2021, the Central Bank had extended its Dh50 billion programme under the Targeted Economic Support Scheme until June 30, 2022, hence, the banks will continue to be eligible to access the collateralised zero-cost liquidity facility until the middle of next year.

Earlier this year, the Central Bank had announced that the loan repayment deferral component of the Tess would expire on December 31, 2021, marking the first phase of the regulator’s gradual exit strategy from the measures implemented during the pandemic. The Tess programme to support new lending and financing will now continue until June 30, 2022.

However, other measures such as lowered reserves requirements for banks and the level of the loan-to-value ratio applicable to mortgage loans remain in place.

The UAE economy has bounced back this year, reaching almost pre-Covid levels, after shrinking last year due to the pandemic. The Central Bank projected in its second-quarter 2021 report that real GDP will expand 2.1 per cent in 2021 and 4.2 per cent in 2022 – including the non-oil economy.

The apex bank said the UAE banking sector has demonstrated its resilience during the pandemic, aided by its Targeted Economic Support Scheme.

In a meeting held between the UAE Central Bank, CEOs of the banks operating in the country hailed the Central Bank’s ongoing support of the UAE financial system through the Tess and noted that the banking sector maintains an adequate capacity to support economic recovery.

“Looking ahead, expectations on the role of the banking sector will increase further. The banks will be expected to contribute significantly to our nation’s far-reaching and ambitious agenda, and to become leaders not only in the region but also in the global financial industry,” added Central Bank governor Balama.

-waheedabbas@khaleejtimes.com