Islamic Finance

UAE sets up 100 bln dirhams scheme to contain COVID-19 impact on private sector


The Central Bank of the UAE on Saturday (Mar 14) announced a 100 billion dirhams ($27.23 billion) Targeted Economic Support Scheme for retail and corporate customers affected by COVID-19.

The scheme consists of 50 billion dirhams from central bank funds through collateralized loans at zero cost to all banks, and another 50 billion dirhams freed up from banks’ capital buffers.

“The purpose of the targeted scheme is to facilitate provision of temporary relief from the payments of principal and interest on outstanding loans for all affected private sector companies and retail customers in the UAE,” said the central bank in a statement.

Banks are to use the funding to give temporary relief to private sector corporate customers and retail clients for a period of up to 6 months.

The central bank will allow all banks to tap into a maximum of 60% of their capital conservation buffers. Banks designated as systemically important by the central bank will be able to use 100% of their additional capital buffer for systemic importance.

The central bank is also reducing the amount of capital banks have to hold for their loans to SMEs by 15 to 25%, with the hope that this will facilitate SMEs access to financing.

Other measures to help the private sector cope with the fallouts of the virus outbreak include increasing the loan-to-value ratios for mortgages for first-time home buyers by 5 percentage points, revision of the maximum exposure that banks can have to the real estate sector, and new regulations will be adopted to reduce fees incurred by merchants when customers pay using debit or credit cards.

The CBUAE will also issue new regulations to limit fees banks charge to SME customers, and stipulate that banks cannot require larger minimum account balance than 10,000 dirhams.

The central bank will also mandate banks to open accounts for SMEs within two days.

The regulator from Mar 15 will, for 6 months, also waive all fees it charges for payment services provided to banks in the UAE through its payment and settlement systems.

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