The Central Bank of the UAE has greenlit a resilience package to strengthen the banking sector amid ongoing Middle East tensions.
According to the CBUAE board, cited by state news agency Wam, the initiative is designed to support UAE banks “in light of exceptional global and regional circumstances.”
The package gives banks access to liquidity and the ability to utilise capital buffers to help sustain the UAE economy.
The move is supported by the CBUAE’s foreign exchange reserves, which exceed Dh1 trillion ($270 billion). The central bank also highlighted the solid fundamentals of the UAE’s Dh5.4 trillion banking sector.
“The CBUAE’s precautionary policies and proactive frameworks have consistently demonstrated their effectiveness in promoting the resilience and preparedness of the financial and banking sector, while ensuring monetary and financial stability,” stated Sheikh Mansour bin Zayed, Vice President, Deputy Prime Minister, Chairman of the Presidential Court and Chairman of the CBUAE board.
“These achievements are a testament to the sustained confidence in our system and the global competitiveness of the UAE’s national economy.”
The five-part package includes monetary policy actions, liquidity and funding support, capital buffer relief, credit risk management, and additional measures for banks, The National reports.
It provides UAE banks with increased access to reserve balances, up to 30% of the cash reserve requirement, and offers term liquidity facilities in both Dirhams and Dollars.
Temporary relief on liquidity and stable funding ratios will give banks greater flexibility to support the economy.
The package also features the temporary release of the Counter-cyclical Capital Buffer, a macroprudential tool designed to shield banks from future losses and maintain lending during downturns, and the Capital Conservation Buffer, a regulatory requirement for common equity tier 1 capital.
Under the credit risk management component, banks are given flexibility to delay the classification of individual and corporate loans for customers impacted by the crisis.
Given the extraordinary circumstances, banks have been instructed to continue providing essential financing services to support both their customers and the broader national economy.
“The central bank reiterated that the banking system remains in a position of strength [and] banks hold nearly Dh920 billion in liquidity at the central bank,” said Daniel Richards, Mena economist at Emirates NBD.
“Reserve balances alone exceed Dh400 billion, underscoring substantial buffers against market stress.”
The CBUAE also highlighted its preparedness to “deploy necessary policy tools” to maintain the stability of the financial system.
“It remains committed to maintaining and further enhancing the contribution of the UAE’s financial sector to the national vision and its financial sector competitiveness,” according to the regulator.