Overall liquidity in UAE banking system back to pre-Covid levels – Central Bank

The governor of the Central Bank of the UAE (CBUAE) said on Monday that the overall liquidity of the nation’s banking system has returned to pre-Covid levels.

The observation was made during a meeting between Abdulhamid M. Saeed Alahmadi, governor of the CBUAE, with CEOs of the largest banks operating within the country.

“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,” said Alahmadi, according to state news agency WAM.

Monday, March 15, also marked a year since the central bank unveiled its Dhs100bn 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.

Read: UAE Central Bank announces Dhs100bn package to counter Covid-19

It included Dhs50bn of zero-interest, collateralised loans for UAE-based banks and Dhs50bn funds freed up from banks’ capital buffers.

The central bank said this week that the banks’ drawdown of the dedicated TESS zero-cost liquidity facility was Dhs22bn in March 2021, down from the maximum drawdown of about Dhs44bn in Q2 2020, consistent with the temporary nature of the payment deferral scheme, reported news agency WAM.

The CBUAE added that 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.

While the TESS programme was initially launched for a period of six months, it was then 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.

Read: UAE Central Bank extends Targeted Economic Support Scheme until June 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,” added Alahmadi.

In February, the bank had said that UAE national banks had returned close to Dhs14.47bn from the stimulus they received via the TESS programme.

Read: UAE banks return Dhs14.47bn received from Central Bank’s TESS initiative