UAE Central Bank on track to exit second phase of Tess scheme by mid-2022

Some measures from the scheme are expected to remain to support economic recovery

The Central Bank of the UAE said it is closely monitoring the evolving situation globally and stands ready to take additional measures if necessary. Photo: Central Bank of the UAE

The Central Bank of the UAE is on track to complete the second and final phase of the targeted economic support scheme (Tess) — a programme designed to help lenders mitigate the effects of the Covid-19 pandemic and support the country's economic recovery — by mid-2022.

However, some measures from the scheme will remain in place for the time being, the regulator said on Thursday following the UAE Bank CEOs Forum, a quarterly dialogue between the Central Bank and lenders in the country to further develop the banking sector.

The Central Bank “is closely monitoring the evolving situation globally and stands ready to take additional measures if necessary”, it said.

The UAE introduced an economic stimulus worth Dh388 billion ($105.65bn) since the pandemic tipped the world economy into its worst recession since the 1930s. These packages include Dh50bn under the Tess programme to boost liquidity in the financial and banking sector.

Last year, the Central Bank said it will begin a “gradual and well-calibrated withdrawal of the Tess scheme to avoid restricting credit supply and economic growth".

The regulator ended the loan repayment deferral component of the Tess programme on December 31, 2021, marking its exit from the first phase of the initiative.

Banks in the UAE have started reporting growth and will return to pre-pandemic levels of profitability in the next 12-18 months on the back of stronger net interest income and increasing business momentum, Moody's Investors Service said last month.

Profitability will be driven by growth in net interest income, underpinned by rising interest rates expectations and strong business momentum supporting non-interest income, while provisioning efforts ease, it said.

“The Central Bank aims to support the competitiveness of the UAE’s financial system. We share an ambition with the UAE banks to propel the UAE banking sector to be among the best globally,” said governor Khaled Balama.

During the forum, the Central Bank and bank chief executives also discussed the global and UAE economic recovery that began in 2021 and the outlook for this year.

They also discussed key Emiratisation initiatives are aimed at creating new jobs for Emiratis within the banking sector.