Abdul Aziz Al Ghurair
UAE banks have the wherewithal to take on any role in a virus-infected economy. Image Credit: Gulf News Archive

Dubai: The UAE’s banking sector will stand with the nation and its people to face the challenges posed by the coronavirus outbreak to public health and the economy, said AbdulAziz Al Ghurair, Chairman of Mashreq and Chairman of UAE Banks Federation (UBF).

“The coronavirus pandemic has presented a very challenging environment for the UAE and the world," he said. "While the government is doing everything to contain the spread of the virus and protect the public health, the banking sector headed by the Central Bank of UAE (CBUAE) is taking appropriate action to support the economy,” said Al Ghurair.

In recent weeks, the CBUAE announced a Dh260 billion stimulus package to support the economy through the banking sector. These include a Dh50 billion capital buffer relief, Dh50 billion zero-cost funding support, Dh95 billion liquidity buffer relief and Dh61 billion reduction-of-cash-reserves requirements for the banking sector.

The latest central bank programme comes in the form of a 50 per cent reduction in reserves requirements for demand deposits - from 14 per cent to 7 per cent. This measure will inject liquidity of about Dh61 billion, which can be used to support banks’ lending and their liquidity management.

The CBUAE has further extended the duration of the Targeted Economic Support Scheme (TESS). Banks and finance companies participating in the TESS programme will be able to extend to their customers’ deferrals of principal and interest until December 31.

“The central bank support has been substantial in terms of liquidity and capital. By increasing liquidity in the banking sector, it will provide further stability in these uncertain times, and allow banks to offer additional lending and support to critical sectors of the economy."

Steadfast response

Al Ghurair said the banking sector in the country has responded proactively to support individuals and businesses impacted by the outbreak. “Everyone in the country is impacted one way or the other," the Mashreqbank chief said. "In this crisis we have to support one another. All banks have come out with specific measures to support their customers impacted by the pandemic.”

While job losses are reported across various sectors, Al Ghurair said banking sector and most other industrial sectors will try their best to retain their employees. But if the outbreak prolongs for a long time, it could result in job losses.

“No industry will want to lose their human resources. More so in the case of banking sector. If the cost of keeping staff can’t be met with revenues for the business, industries will be forced to take some measures.

"Some companies are already offering paid leave, leave without pay, pay-cuts and offering different job profiles within the same company.”

Bank profitability

In the face of the current epidemic crisis, Al Ghurair said, profitability is not the immediate concern of the UAE banking sector.

“Our prime target is to keep our economy in good health and support our customers amid the current challenges. Once this target is achieve, profits will automatically follow,” he said.

As far as supporting customers, especially small and medium enterprises (SMEs), Al Ghurair said banks’ role is largely focused on making funding available and cheap. Apart from funding, businesses are facing a number of challenges which the government is aware of, and is offering a number of relief measures.

UBF to support banks to recover NMC exposures
A large number of UAE banks are exposed to loans and advances to healthcare provider NMC Group and its associate companies, which are facing allegations of financial mismanagement and fraud.

The disclosures so far have revealed that UAE banks have more than Dh10 billion funding exposures to the troubled healthcare provider and its group companies and associate entities.

“NMC is a case where banks have fallen victim to fraud. They (banks) were dealing with a reputed company with audited balance-sheet, listed on London Stock Exchange and a part of FTSE 100,” said AbdulAziz Al Ghurair, Chairman of UAE Banks Federation (UBF).

He said banks can’t be blamed for lending to a regulated company that turned out to be misstating its accounts.

“UBF will support its member banks to coordinate a strategy to recover the money. I am confident the banks will be able to protect their interests,” said Al Ghurair.