UAE Central Bank unveils AED 100 bln stimulus package to boost economy

The Central Bank of UAE (CBUAE) announced an AED 100 billion (SAR 102 billion) stimulus package to contain the repercussions of the coronavirus outbreak and a subsequent drop in economic activity.

This will be split into AED 50 billion (SAR 51 billion) from CBUAE’s own funds, which will be offered to local banks at zero interest rates. These will be offered as collateralized loans to the borrowing banks, the bank said in a statement.

The other AED 50 billion (SAR 51 billion) will be tapped through the capital buffers operated by banks operating in the country.

The initiative – called The Targeted Economic Support Scheme – will 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.

Participating banks should use the funding to grant temporary relief to private sector corporate customers and retail clients for a period of up to 6 months.

All banks will be allowed to tap into a maximum of 60% of the capital conservation buffer, and, additionally, banks designated as systemically important by the CBUAE will be able to use 100% of their additional capital buffer for systemic importance.

The CBUAE is also reducing the amount of capital banks have to hold for their loans to small and medium enterprises (SMEs) by 15-25%. This change, which is broadly in line with the minimum standards set by the Basel Committee, will facilitate further access of SMEs to financing.

“The CBUAE will continue monitoring the situation very closely, and is prepared to take further steps, if necessary” the statement added.

Meanwhile, the Saudi Arabian Monetary Authority (SAMA) launched an SAR 50 billion financing package to support the private sector, especially the SMEs, and mitigate the potential economic impacts of the coronavirus outbreak.