Banking system well-capitalised, liquid: CBUAE

Inayat-ur-Rahman, Business Editor

Through the annual report, the UAE Central Bank expressed its pride in its vital role in promoting the country efforts to contain the financial and economic challenges caused by the COVID-19 pandemic by applying a policy-based approach in the banking and insurance sectors, which are under its supervision.

Khaled Mohamed Balama, Governor of the UAE Central Bank said that he is pleased to report that the banking system is well-capitalised, liquid and has the ability to support the growth agenda of the United Arab Emirates.

“2021 contained a mix of challenges and opportunities. The CBUAE played a critical role in steering the nation through the economic challenges of the COVID-19 pandemic. It applied a rigorous policy-based approach to the banking and insurance sectors that it regulates and supervises, responding to evolving economic developments and providing leadership in difficult times.” Governor, CBUAE added.

“Bottom-up stress tests to explore potential banking sector vulnerabilities showed that the UAE’s financial system is resilient and capable of withstanding the various scenarios while maintaining adequate capital and liquidity levels. The CBUAE also rebalanced its pandemic-related stimulus programme, the Targeted Economic Support Scheme (TESS), replacing measures designed to ease retail, corporate and banking pressures with more focused initiatives to support the recovery.”

Pursuing its continuous efforts to modernise its monetary operations, the CBUAE rolled out the Dirham Monetary Framework, including the issuance of Monetary Bills and the launch of new monetary instruments for liquidity management and forecasting – the Intraday Liquidity Facility and the Dirham Overnight Index Average (DONIA). We aim to increase the Dirham’s use to settle transactions within the Gulf Cooperation Council (GCC) and with our other international trading partners to relieve pressure on domestic entities to secure liquidity in foreign currency for cross-border transactions.”

“Other regulatory framework enhancements in 2021 included changes in paid-up capital requirements for banks, consumer protection standards, regulation of digital payments and outsourcing of services.”

“Our new Targeted Operating Model and organisational structure will assist our internal operations in meeting the future challenges and demands on the UAE’s financial system. The merger of the Insurance Authority into the CBUAE was completed last year, with substantive enhancements in the CBUAE’s supervisory and regulatory role. We welcomed all 120 employees of the former Insurance Authority to the CBUAE team.”

“We underlined the importance of our human resources, raising the percentage of UAE nationals and expanding professional training opportunities. We also launched a pioneering training initiative in risk-based supervision in cooperation with the Irish Institute of Banking, a leading international organisation for training of finance professionals.

On the increasingly important cyber-security front, the CBUAE conducted a cyber war-gaming exercise – the first of its kind in the UAE. This tested the banking sector’s cyber-resilience and ability to deal with the sophisticated cyber-attacks that have unfortunately become a threat globally.

“The CBUAE launched numerous fintech initiatives, which include the mBridge Platform to improve processing cross-border fund transfers, the National Payment System Strategy (NPSS) to modernise the payments infrastructure, a SME funding platform, and the Financial Services Cloud Infrastructure, with the objective of making the UAE a centre of excellence in MENA financial cloud services. These measures are designed to put the UAE at the forefront of jurisdictions offering the most secure, advanced and innovative digital banking services in the world.”

“The CBUAE takes its AML/CFT responsibilities seriously, developing our policies, systems and processes accordingly. We have created the required AML/CFT infrastructure, in coordination with the National Committee, to ensure that we provide safe and transparent financial services in the UAE. We will continue to work closely with FATF and other international bodies in the fight against money laundering and terrorist funding.”

Balama  added that he would like to offer his sincere thanks to the Board of Directors, CBUAE employees and all our associates for their tireless efforts in bringing these projects to fruition. Together, we readied the organisation to achieve its goals of providing monetary and financial stability to the UAE and becoming one of the world’s top central banks.

“Our mission at the CBUAE in 2022 is clear and focused. We aim to enhance monetary management and financial stability, and to protect consumers through effective supervision of licensed financial institutions, prudent management of reserves, robust financial infrastructure and the adoption of digital technologies.”

“We enter 2022 with enthusiasm and the firm commitment to become one of the world’s top central banks. We face the future with confidence, well-equipped to deliver our vision and mission for the nation over the next 50 years.” Balama concluded.