The Central Bank of the UAE (CBUAE) has introduced new general terms and conditions for its standing credit and liquidity insurance facilities, as part of its Dirham Monetary Framework implementation plan.
The new terms and conditions which will come into effect from March 2022 onwards, will allow licensed financial institutions in the UAE to access CBUAE reserves on an overnight or term basis by posting eligible collateral.
The new terms and conditions will define the discretions associated with the activation of these facilities and guidelines for collateral management.
At their own discretion, eligible competitors can access any standing credit facilities to draw on CBUAE reserves overnight, through Collateralized Funding or Murabaha Transactions, to deal with temporary liquidity needs.
Furthermore, the CBUAE may activate the Contingent Liquidity Insurance Facility in response to real or future pressure of unusual nature, where qualified competitors need CBUAE reserves for wider terms.
“The reorganization of the spectrum of eligible collateral will ensure more effective intervention by the CBUAE to provide eligible counterparties with liquidity at times of stress, or to deal with domestic market issues. The new features of the standing credit and liquidity insurance facilities shall also assist the CBUAE to cope with all market conditions.”
CBUAE endorsed the Dirham Monetary Framework (inclusive of the Guidance Manual of the Monetary Bills Programme) in 2020 for the achievement of monetary policy objectives, including policies relating to the management of the exchange rate of the national currency and money market in the UAE.