Stock UAE Central Bank -Sharjah
The overall liquidity of the UAE banking system returned to the pre-COVID level according to Abdulhamid M. Saeed Alahmadi, Governor of the Central Bank of the UAE (CBUAE). Image Credit: Virendra Saklani/Gulf News

Abu Dhabi: The overall liquidity in UAE's banking system has returned to pre-COVID-19 levels, according to Abdulhamid M. Saeed Alahmadi, Governor of the Central Bank.

The Governor on Monday held his first quarterly meeting of the year with CEOs of the largest banks in the country. The meeting focused on the effectiveness of the Targeted Economic Support Scheme (TESS) in mitigating the implications of the pandemic on the economy.

The banks’ drawdown of the dedicated TESS Zero-Cost Liquidity facility was Dh22 billion as of this month, down from the maximum drawdown of about Dh44 billion reached in Q2-2020, which is consistent with the temporary nature of the payment deferral scheme.

It is satisfying to see that the TESS programme yielded positive impact for the UAE’s banking sector and the wider economy. The introduction of the stimulus package came at a critical juncture and ensured banks were able to mitigate funding and liquidity pressures and maintain their lending capacity

- Abdulhamid M. Saeed Alahmadi, Governor of Central Bank of the UAE

From its inception, more than 320,000 customers, including individuals, small to medium-size enterprises and other private corporations have benefitted from TESS. There are about 175,000 customers under the current deferral arrangements.

The Governor also discussed other issues impacting the banking sector, such as the transition from the existing interbank offered rate IBOR to alternative reference rates, and the role of the banking system in supporting post-COVID-19 recovery of the economy.

“It is satisfying to see that the TESS programme has yielded positive impact for the UAE’s banking sector and the wider economy. The introduction of the stimulus package came at a critical juncture and ensured banks were able to mitigate funding and liquidity pressures and maintain their lending capacity.”

Robust recovery

“In tandem with the banking sector, we pave the way for the UAE’s robust economic recovery from the pandemic," he added. "Our base projection envisages recovery of the UAE economy in 2021 with the real GDP to increase by 2.5 per cent. CBUAE will continue to closely monitor market and economic developments both in the UAE and globally.” 

TESS is a comprehensive programme covering all CBUAE measures in response to the pandemic. In November, the it extended the applicability period of the TESS zero-cost liquidity facility and TESS loan deferral and recovery programme until June 302021, along with other regulatory relief measures, which will remain in place through 2021.