Central Bank calls on banks to help kickstart investment cycle

BBN Report

CBUAE, govt willing to extend further help to businesses

ABU DHABI/February 09-2021: Despite an inevitable contraction projected for the UAE’s economy during 2020, the indicators of banking system and financial institutions have been encouraging, according to the Governor of the Central Bank of the UAE.

The gross assets, deposits and lending of the banking system in the country have all increased, albeit slightly. “The more than adequate levels of capital (18.2 per cent, Tier 1 of 17.1 per cent) and eligible liquid asset ratio (18.4 per cent) for the UAE banks, alongside sufficient levels of provisioning, means banks and financial institutions in the UAE have displayed robustness in the face of the pandemic’s onslaught,” said Abdulhamid M. Saeed Alahmadi (seen in the picture), the Governor of the Central Bank of UAE.

The governor was conveying his message when he recapped 2020 and spoke about the way ahead, according to a WAM report. He said while the profit may be down for some banks, it needs to be viewed in the context of a bad year the whole world witnessed, rather than a fundamental shift in solvency or appetite to do business.

“In 2020, we saw various geo-political issues being resolved and new trade and investment opportunities emerge, which were previously not available,” the governor added.

Inviting the business and banking community to take part in the new era, the CBUAE governor called upon the banks to kick-start the investment cycle, to expand credit appetites, help customers in need and forge a roadmap, which is different from before.

“Banks and other financial institutions need to go back to the drawing board and redefine their strategies in a new world with redefined geo-political lines; a global economy that is rapidly digitising new trade maps and consumers that demand the best services,” he asserted.

More assistance available

He reminded that the Government of the UAE and the CBUAE are ready to provide assistance in all matters and will ensure providing impetus to both existing and new businesses.

“Let us come together to redefine how we do business, and continue the successful journey of our country forward,” Alahmadi said while thanking the financial and business community for their resilience through 2020.

Signs of recovery

The early signs of recovery were seen in the late second half of 2020 and the pace of normalisation continues as global trade picks up and protection barriers created on the movement of goods have started disappearing.

China’s positive performance and a coordinated effort by governments across the globe have meant that the right elements for normalisation are out there and beginning to help.


The intervention of the Central Bank of the UAE (CBUAE), through the Targeted Economic Support Scheme (TESS) and various regulatory relaxations, was timely and meant that the required level of support was provided and helped banks through their testing times.

The Government of the UAE implemented various successful measures to facilitate ease of doing business and applied various relaxations on fees and costs to ensure the continued momentum of business activity.

The utilisation of the TESS programme, which has now come down to about 50 per cent from its peak, is a strong indicator that banks are now gradually coming back to manage their credit books and navigate the way forward.

The governor highlighted the fact that as of December 31, 2020, there were a number of positive signs in the market that have been quite heartening as there were a number of bond and sukuk issuances as capital markets activities sprang back to normal.

Signs of recovery

The signs of recovery in the 4th quarter of 2020 were also validated by a number of data points, which included the Purchasing Managers Index (PMI) that has been above the 50 threshold.

The employment rate in the UAE, proxied by the CBUAE Wage Protection System (WPS), has improved by 1.7 per cent in December on a month-on-month (MoM) basis.

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