CBUAE monitors banks’ utilisation of TESS

ABU DHABI (Agencies): The Cental Bank of UAE (CBUAE) is closely monitoring banks’ utilisation of the Targeted Economic Support Scheme (TESS) programme for the benefit of individuals, small and Medium Enterprises (SMEs) and other private corporates affected by COVID-19 pandemic, the central bank said on Sunday.

The Governor of the Central bank of the UAE (CBUAE) met with CEOs of all banks on April 12, 2020 to discuss the implementation of the TESS.

As part of its ongoing mandate to safeguard consumers, the CBUAE developed detailed regulations and guidelines in relation to the Targeted Economic Support Scheme: Banks are urged to process more applications from individuals, corporates and SMEs whose business operations are affected by the implications of COVID-19 pandemic and banks are expected to retain sound lending standards and are required to treat all their customers fairly.

Onus on banks

During the validity of the TESS, which runs up to year end 2020, banks are expected to postpone the payments of interest and/-or principal of loans for customers; Individuals, SMEs and other private sector companies affected by the repercussions of the COVID-19 pandemic.

The TESS includes a liquidity relief tool of Dh50 billion offered by the CBUAE through banks to eligible customers who wish to apply for a deferment. Those eligible customers impacted by the effects of the pandemic will not be required to pay their respective bank any installments, consisting of principal and/or interest/profit, for the agreed deferment period. However, any interest/profit accrued during the deferment period on the principal amount, will be paid by the customer at a later date, to be agreed upon with their respective bank. Banks should not charge any interest/profit on the deferred interest/ profit amounts, the CBUAE said in a statement.

The CBUAE has mandated banks to accelerate the account opening time to a maximum of two days for SMEs, unless banks identify the customer as high risk from an anti-money laundering perspective. Additionally, banks shall not be allowed to require their SME customers to have a minimum account balance amounting to over Dh10,000. This measure is aimed at providing banks’ customers with economic relief and to facilitate the continuation of business operations in the UAE.

Additional measures taken by CBUAE include the decrease of the minimum required down payment, to increase the affordability of real estate.

30% of TESS utilised

“Banks have already utilised over 30 per cent of allocated funds from the TESS facility and are actively passing on these funds to their customers affected by the COVID-19 pandemic. We will continue to work closely with banks and financial institutions to accelerate their full utilisation of the TESS. This requires banks to closely collaborate with us and intensify their efforts to implement the economic stimulus package for the benefit of the banking sector and the UAE economy,” said Abdulhamid Saeed, Governor of the Central Bank of the UAE.

The TESS facility will support the economy, with an aggregate value of all capital and liquidity relief measures adopted by the CBUAE amounting to Dh256 billion.

The CBUAE expects all banks to fully participate in the TESS to actively mitigate the repercussions of the COVID-19 pandemic and provide necessary relief measures enabling the banking sector to continuously finance businesses and other economic sectors. The CBUAE will begin to publish the TESS facility usage by individual banks starting May 2020.