UAE's stimulus to support bank liquidity; increase potential problem loans - Moody's | ZAWYA MENA Edition:
The UAE central bank’s additional measures to foster the economy will support the banks' liquidity and limit their likely material asset quality deterioration, but will increase potential for problem loan formation, Moody's said on Tuesday.
The central bank on Sunday announced a new stimulus package to support the economy during the coronavirus pandemic. The package increased the size of its Targeted Economic Support Scheme to AED256 billion ($70 billion, or around 17 percent of the country's GDP) from 100 billion dirhams.
The additional measures include a relaxation of a liquidity buffer requirement that will release $26 billion in liquidity; a cash reserve requirement reduction that will inject $17 billion of liquidity; and the introduction of transitional arrangements for the accounting of expected credit losses.
The $70 billion scheme now equals 16 percent of UAE banks’ domestic credit and 8 percent of their total assets as of February 2020.
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