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The Central Bank of the UAE (CBUAE) will introduce a new securities issuance program to licensed financial institutions and eligible investors, named Monetary Bills (M-bills), effective 11 January 2021.
These securities will be auctioned and traded through Bloomberg’s primary and secondary market solutions and settled through a local platform, compliant with international standards, built and operated by Euroclear Bank, CBUAE said in a statement.
Saif Hadef Al Shamsi, Deputy Governor of the CBUAE, stated: "The launch of the M-Bills program provides us with the opportunity to establish robust infrastructure required not only to manage liquidity, but also to provide a stable collateralized source of funds to banks and financial institutions operating in the UAE."
The new issuance program aims to provide a holistic solution to manage liquidity within the UAE banking sector. The launch of the M-Bills, replacing the existing conventional certificates of deposit program, represents another important milestone towards the implementation of the new Dirham Monetary Framework announced earlier this year, the statement said.
"The set-up of such infrastructure will also assist in the development of a Dirham local market for securities issued by the public sector in the UAE in future," Al Shamsi said.
As a first step towards implementing the Dirham Monetary Framework, the CBUAE in July launched a new deposit facility for UAE based conventional banks called the overnight deposit facility.
With the M-bills programme, CBUAE plans to promote the development of a secondary market for securities denominated in UAE Dirham and thus contribute to the establishment of the risk-free pricing benchmark (yield curve), which could stimulate further domestic market activities.
M-Bills’ settlement cycle will include primary issuance to secondary market trading through a seamless interfaced platform developed jointly with Euroclear Bank, the Brussels-based international central securities depository, and Bloomberg, the global business and financial information and news leader, the statement said.
CBUAE will be using Bloomberg AIM for order management processes of market operations. The issuance of M-Bills will be through a transparent auction process conducted on a regular basis. The CBUAE shall set the calendar and the volumes to be offered, and shall maintain specific control over the maturity periods.
The establishment of an innovative Euroclearable domestic platform, along with the auctioning and tradability of the M-Bills through the Bloomberg Bond Auction and E-Bond systems, will facilitate broader access to the M-Bills market for eligible investors – in a more secure, efficient, and a standardized way, the statement from CBUAE said.
(Writing by Seban Scaria; editing by Daniel Luiz)
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