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Sharjah initiates Dhs4bn liquidity support to offset virus impact

The move aims to provide additional financial assistance to all businesses impacted by the pandemic

by Zainab Mansoor

June 3, 2020

The Sharjah Finance Department (SFD) established a framework worth Dhs4bn to prop up liquidity for the banking system in the emirate.

The move aims to provide additional financial assistance to all businesses impacted by the pandemic, WAM reported.

“Issued as 12 month dirham-denominated paper in several tranches, the Sharjah Liquidity Support Mechanism (SLSM) Sukuk represents the first rated short term local currency tradeable instrument in the UAE, which can be used for liquidity management by banks,” SDF said in a statement on Tuesday.

“This paper has a short term investment grade rating of A-2 by Standard & Poor’s rating agency,” it added.

Waleed Al Sayegh, director-general of Sharjah Finance Department said, “The authorities in Sharjah and across the region are taking the required measures to provide maximum assistance to all businesses dealing with the impact of the outbreak. This service will allow banks to use the Sukuk as security to access liquidity facilities at the UAE Central Bank, by following the required guidelines.”

A first tranche of the SLSM was subscribed to in May by Bank of Sharjah with a Dhs2bn participation.

Additional tranches with one or more other banks are expected to expand the SLSM to Dhs4bn.

On March 15, the UAE Central Bank (CBUAE) announced a Dhs100bn stimulus package, the Targeted Economic Support Scheme (TESS), which included Dhs50bn of zero-interest, collateralised loans for UAE-based banks and Dhs50bn funds freed up from banks’ capital buffers.

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

On March 22, the UAE boosted the size of its stimulus package to Dhs126bn.

Read: UAE boosts stimulus to $34bn to fend off virus impact

On April 5, the CBUAE issued further directives to offer relief measures to banks, corporates and individuals within the country which included, among other measures, the reduction by half the reserves requirements for demand deposits for all banks from 14 per cent to 7 per cent.