The Central Bank of the UAE (CBUAE) has decided on reviewing two significant operational ratios for banks operating in UAE to encourage the implementation of the TESS and support their impacted customers in overcoming the repercussions of COVID-19 pandemic.
Launched in March 2020, Targeted Economic Support Scheme (TESS) was established to further enhance the capacity of the banking sector to support the economy.
CBUAE is reviewing its Net Stable Funding Ratio (NSFR) and Advances to Stable Resources Ratio (ASRR) by temporarily relaxing the requirements for the structural liquidity position of banks.
As per the new relaxations, NSFR, which is mandatory for the five largest UAE banks will be allowed to drop below 100 percent threshold, but not lower than 90 percent.
The ASRR, which is applicable to all other banks, including foreign branches will be permitted to be floated above the 100 percent threshold, but not higher than 110 percent.
The relaxation will be effective until 31st December 2021, will provide banks with enhanced flexibility in managing their balance sheets.
The CBUAE has also clarified that for the purposes of calculating NSFR and ASRR, the CBUAE Zero Cost Funding Facility under the TESS program should be treated as stable funding with a 50 percent weight, irrespective of its maturity. The weight determines the extent to which funding sources are considered as stable, in order to be eligible to fund long-term assets.
