UAE Central Bank starts to withdraw COVID-19 stimulus measures

To leave lower reserve requirements for banks unchanged

General view of Central Bank of The U.A.E. on January 3, 2017 in Dubai, United Arab Emirates.

General view of Central Bank of The U.A.E. on January 3, 2017 in Dubai, United Arab Emirates.

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The Central Bank of the UAE will begin to gradually unwind stimulus measures introduced to mitigate the economic slowdown caused by COVID-19.

The central bank said it has assessed the UAE's financial system as stable. The liquidity in the banking system and banks’ capital buffers remained adequate, the regulator said following in a meeting of the country's bank chiefs on Tuesday.

Khaled Mohamed Balama, Governor of the CBUAE, 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."

In view of this, the central bank "is starting a gradual and well-calibrated withdrawal of its Targeted Economic Support Scheme (TESS) to avoid restricting credit supply and economic growth."

The CBUAE 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 homebuyers.

The regulator also said it may extend beyond the end of this year regulatory relief measures that allow banks to maintain lower capital and liquidity buffers, depending on the pace of economic recovery and loan demand.

(Writing by Brinda Darasha; editing by Daniel Luiz)

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