The Central Bank of the UAE (CBUAE) is introducing an Intraday Liquidity Facility (ILF) that will enable licensed financial institutions to mitigate intraday liquidity risks.
According to the CBUAE statement, the new liquidity management facility will be effective on April 21 as part of the central bank’s current Dirham Monetary Framework.
The facility aims to provide eligible counterparties, participants in the UAE Funds Transfer System, access to AED funding from the CBUAE on an intraday (“within the day”) basis, to ensure that payments are settled on a real-time basis.
Participants must submit “eligible collateral” to the CBUAE in order to receive intraday support, according to the terms of the new facility. The bank has stated that the ILF will be given at no cost to encourage financial institutions to repay borrowed funds by the designated cut-off period at the end of each business day.
“The launch of the Monetary Bills program earlier this year, along with the existing Islamic Certificates of Deposits program, facilitates the development of this innovative facility. I am confident that the financial markets infrastructure deployed for this facility will not only enable licensed financial institutions to mitigate intraday liquidity risks when there are timing mismatches between their daily inflows and outflows but also help increasing efficiency of payments through the UAE Funds Transfer System.”
Recently, the regulator has reported its decision to extend the Targeted Economic Support Scheme (Tess), the Dh50 billion ($13.61bn) zero-cost funding program set up a year ago to assist lenders to maintain funding flows across the economy following the onset of COVID-19.
Furthermore, the UAE’s banking regulator has taken several steps to expand the banking sector and strengthen the country’s payment systems.