UAE international reserves surge to $141.41bln

The overall liquidity of the nation’s banking system has returned to pre-Covid levels

Central Bank of the United Arab Emirates. Image Courtesy: WAM Image used for illustrative purpose

Central Bank of the United Arab Emirates. Image Courtesy: WAM Image used for illustrative purpose

UAE - The international reserves of the UAE banking system have grown by Dh12.6 billion over three months, from November 2020 to January 2021, to Dh519 billion, the Central Bank of the UAE (CBUAE) has revealed.

With this rise, the cumulative balance of the country’s international reserves surged 2.3 per cent compared to the Dh507 billion registered in November last year.

The continuous surge in the national banking system’s international reserves underscores its robust financial solvency and its ability to address any financial and economic conditions and changes to foreign exchange rates, as well as its capacity to meet the country’s needs from global markets.

The UAE banking system’s international reserves is expected to rise further in the coming period, reflecting the improvements across the system’s indexes in recent months.

Recently, the governor of the CBUAE Abdulhamid M. Saeed Alahmadi said that the overall liquidity of the nation’s banking system has returned to pre-Covid levels.

“Our base projection envisages recovery of the UAE economy in 2021 with the real GDP to increase by 2.5 per cent. CBUAE will continue to closely monitor market and economic developments both in the UAE and globally,” Alahmadi said during a meeting with CEOs of the largest banks operating within the country, according to state news agency WAM.

March 15 marked a year since the CBUAE unveiled its Dh100 billion economic stimulus package, the Targeted Economic Support Scheme (TESS), to help businesses counter the economic fallout of the Covid-19 pandemic and increase liquidity within the banking system.

It included Dh50 billion of zero-interest, collateralised loans for UAE-based banks and Dh50 billion funds freed up from banks’ capital buffers.

According to the CBUAE, the banks’ drawdown of the dedicated TESS zero-cost liquidity facility was Dh22 billion in March 2021, down from the maximum drawdown of about Dh44 billion in Q2 2020, consistent with the temporary nature of the payment deferral scheme.

From the inception of the TESS programme, more than 320,000 customers, including individuals, small to medium-size enterprises and other private corporations, have benefitted from it. There are about 175,000 customers under the current TESS deferral arrangements.

The TESS programme, which was initially launched for a period of six months, was subsequently renewed. In November 2020, the CBUAE extended the validity of key components of the TESS scheme including the zero-cost liquidity facility and the TESS loan deferral and recovery programme until June 30, 2021, along with other regulatory relief measures, which will remain in place through 2021.

“It is satisfying to see that the TESS programme has yielded positive impact for the UAE’s banking sector and the wider economy. The introduction of the stimulus package came at a critical juncture and ensured that banks were able to mitigate funding and liquidity pressures and maintain their lending capacity,” said Alahmadi.

In February, the apex bank said that the UAE national banks had returned close to Dh14.47 billion from the stimulus they received via the TESS programme.

Meanwhile, banks across the UAE have further reduced their payrolls and shut more branches as the industry continued to move towards digitisation and cost-cutting amid the coronavirus pandemic, CBUAE data shows.

From October to December 2020, at least 18 branches closed their doors, reducing the total number of outlets nationwide to 541 at the end of the last quarter. During the same period, 447 employees in the banking sector lost their jobs, with the total workforce falling by 1.3 percent to 33,444 at the end of December 2020.

“The need for operating efficiency, cost effectiveness to support banks’ bottom line is driving digitisation and the closure of branches,” the UAE Central Bank said in its latest Quarterly Economic Review.


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