CBUAE’s foreign assets reach Dhs406 billion in February

The total foreign assets of the Central Bank of the UAE (CBUAE), were valued at Dhs405.94 billion in February 2020, according to the latest figures released by the central bank.

This figure indicates an increase of approximately Dhs47 billion, or 13 per cent, compared to the same month last year.

This growth in the Central Bank’s foreign assets balances reflect overall positive markers for the UAE market economy.

According to the Central Bank foreign securities totalled Dhs18.07 billion, a Dhs6.6 billion increase from January 2020. Meanwhile ‘other foreign assets’ reached Dhs18.09 billion in February 2020, a decrease of Dhs1.4 billion from the previous month.

Current account balances and deposits with banks abroad registered a growth of 27.6 per cent this February, totalling Dhs369.78 billion compared to Dhs289.76 billion during February 2019.

Earlier the bank reported that the foreign currency balance of the Central Bank of the UAE jumped to Dhs400 billion in January 2020, a rise of 1.3 per cent compared to Dhs394.73 billion in December 2019.

The bank’s statistics showed that the increase is due to the rise of balances and deposits held in banks abroad, which amounted to some Dhs369 billion, a growth of around one per cent compared to Dhs365.68 billion in December 2019.

According to the criteria followed by the bank, its assets in foreign currencies do not include its reserves and the special drawing rights of the International Monetary Fund.

The balance of the bank’s securities held until maturity reached around Dhs11.47 billion in January while the balance of other foreign assets amounted to Dhs19.49 billion in the same month.

The total foreign currency assets held by the Central Bank of the UAE increased to Dhs381 billion by the end of 2019, a year-on year (YOY) growth of 5 per cent from Dhs363.27 billion, accounting for 29 percent of total deposits held by Emirati banks, which stood at Dhs1.303 trillion by the end of December, according to figures revealed by the Central Bank of the UAE.

The growth is reflective of the increased investor trust in UAE-based banks by virtue of the country’s strong financial system.

As per the country’s primary financial regulator, foreign currency deposits of various terms valued at circa Dhs245.24 billion by the end of 2019, a YOY growth of 6.8 per cent.

Foreign demand deposits hit Dhs115.9 billion by end of December, a 10 per cent growth on year, while savings deposits picked up 18 per cent to Dhs19.77 billion over the same reference period.

The rest of deposits, which total Dhs922 billion, are held in Dirham, according to the CBUAE statistics.

The value of the liquidity withdrawn by the Central Bank of the UAE from the market in 2019 totalled Dhs22 billion, highlighting the surplus liquidity in the UAE’s banking system. The CBUAE manages the country’s monetary policy to serve the national economy in general, through a variety of instruments.

Certificates of Deposit (CDs) represent one of the CBUAE’s tools for enforcing its monetary policy and managing liquidity in the market.

Statistics from the apex bank show that the total balance of CDs increased to Dhs160.2 billion in 2019, a rise of 15.9 per cent compared to Dhs138.2 billion in 2018.

The figures also show that the first quarter of 2019 witnessed an increase in the balance of CDs held by the bank to around Dhs139.2 billion while in the second quarter of the same year, this amount was Dhs155.8 billion.

In the third quarter of last year, the bank pumped liquidity into the market, which led the balance to slightly drop to Dhs153.8 billion, before surging again in the fourth quarter to Dhs160.2 billion.

The Central Bank of the UAE announced on Monday that it will cut interest rates, beginning 16th March, following US Federal Reserve cuts to contain the economic repercussions of coronavirus, COVID-19.

According to the statement, following the US Federal Reserve Board’s decision to cut the Federal Funds Rate at emergency meeting to contain the repercussions of the global pandemic COVID-19, the Central Bank of the UAE, CBUAE, effective from Monday (16th March 2020), has decided to cut the interest rate applicable to the one-week Certificates of Deposit (CDs), by 75 basis points, in line with the Federal Funds Target Rate - Upper Bound; maintain the Repo Rate, applicable to borrowing short-term liquidity from CBUAE against CDs at 50 basis points above the one-week CD rate; reduce rates applicable to the Interim Margin Lending Facility (IMFL), and the Collateralised Murabaha Facility (CMF), by 50 basis points, to 50 basis points above the Repo Rate against CDs.

Certificates of Deposit, which CBUAE issues to banks operating in the country, are the monetary policy instrument through which changes in interest rates are transmitted to the UAE banking system.

WAM