The Central Bank of the United Arab Emirates (UAE) has finalized its plan to launch an intraday Liquidity Facility, which will enable all licensed financial institutions to mitigate intraday liquidity risks.
In recent times, the central bank introduced its new Dirham Monetary Framework under which the intraday Liquidity Facility has been launched. The new initiative is set to be introduced on 21st April.
Speaking about this new development, Khaled Mohamed Balama, governor Central Bank of United Arab Emirates (CBUAE) remarked:
To obtain intraday funding from the CBUAE, participants are required to submit “eligible collateral”, with terms set out in the conditions of the new facility. The ILF will be offered at zero cost to incentivise financial institutions to repay borrowed funds by the designated cut-off time at the end of each business day.
“The launch of the Monetary Bills programme earlier this year, along with the existing Islamic Certificates of Deposits programme, 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,” he further added.
In order to obtain intraday funds from the CBUAE, participants in the UAE Funds Transfer System will be required to submit eligible collateral, according to the requirements set out in the terms and conditions of the new facility.
It was also revealed that ILF will be offered at zero cost in order to incentivize eligible counterparties to repay borrowed funds by the designated cut-off time at the end of each working day.