COVID-19 impact and CBUAE’s response
by Aakash Ramchand Dil As the COVID-19 virus spreads across the globe, economic consequences will follow, both in the short- and long-term. To soften the coronavirus’ blow to the UAE economy and support UAE lenders, The Central Bank of the UAE (the “CBUAE”) has issued a number of communications, standards and guidelines as part of a relief package, pertaining to the following: • Targeted Economic Support Scheme (“TESS”) • Mortgage Loans • Capital Adequacy • Liquidity • IFRS9 • Expired Emirates ID / Visa Compliance
targeted economic support scheme (TESS) TESS was introduced as a ‘Zero Cost Facility’ against collateralizing CDs/ICDs, already in place with CBUAE to contain the repercussions of the COVID-19 pandemic, designed to facilitate the provision of temporary relief from payments of principal and/or interest/profit on outstanding loans for all affected private sector corporates, SMEs and individuals. TESS is summarized as follows: • Effective from 15 March 2020. • Clients entering the TESS program will temporarily cease payments of principal and/or interest/profit. Their facilities may be re-scheduled or restructured, typically without a loss of net present value. In some cases, additional credit lines may be offered. • The TESS also states that the IFRS 9 staging for TESS clients will remain unchanged for the duration of the scheme. This is based on the presumption that most of those clients have not experienced a significant increase in credit risk by virtue of their eligibility for the scheme. Initially, the maturity of TESS was 15 September 2020; however, the same has been extended from 15 September 2020 to 31 December 2020 in a subsequent communication from CBUAE.
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Intelligent Risk - July 2020
