#UAE Central Bank Changes Terms for Credit, Liquidity Insurance Facilities - Bloomberg

UAE Central Bank Changes Terms for Credit, Liquidity Insurance Facilities - Bloomberg

The United Arab Emirates central bank is changing how financial institutions can access its standing credit and liquidity insurance facilities to deal with temporary liquidity needs.

New terms will define the “discretionary powers” related to the activation of these facilities, and the guidelines for collateral management, it said. They come into force on March 1. Financial institutions can access central bank reserves on an overnight or term basis by posting eligible collateral, it said.

The changes “will ensure more effective intervention” by the central bank “to provide eligible counterparties with liquidity at times of stress, or to deal with domestic market issues,” central bank governor Khaled Mohamed Balama said.

Banks can access the standing credit facilities to draw on central bank reserves through Collateralized Funding or Murabaha Transactions, the statement added.

The central bank may also activate its contingent liquidity insurance facility in response to “any actual or prospective stress of an exceptional nature,” it said. This is for when institutions may need the central bank’s reserves for extended terms.

The central bank said the changes were part of the Dirham Monetary Framework implementation plan launched in 2020. It started an overnight deposit facility in July of that year.