Regulation Regarding Accounting Provisions and Capital Requirements - Transitional Arrangements

Page 1 of 2 Notice No. : CBUAE/BSD/N/2020/2016 Date : 22 April 2020 Classified : .Class To : All Banks and Finance Companies operating in the UAE Subject : Regulation Regarding Accounting Provisions and Capital Requirements - Transitional Arrangements

After greetings,

Please be informed that the Board of Directors of the Central Bank has issued Decision No. 49/3/2020 dated 5th April 2020, regarding the Targeted Economic Support Scheme (TESS), to contain the repercussions of the COVID-19 pandemic in the UAE.

Arising from this, the Central Bank is issuing the attached “Regulation Regarding Accounting Provisions and Capital Requirements - Transitional Arrangements”.

This Regulation provides for a “Prudential Filter” that permits Banks and Finance Companies to add back increases in IFRS 9 provisions to the regulatory capital over a transition period of 5 years, on a proportionate basis.

The increase in IFRS 9 provision requirements is determined by calculating the difference between the IFRS 9 provision as at 31/12/2019 and the IFRS 9 provision as at of the respective reporting date.

The proportion of the increase in IFRS 9 provisions that is permitted to be added-back to regulatory capital from 1 January 2020 onwards will decline over a 5-year transition period (100%, 100%, 75%, 50%, 25% for the years 2020-2024).

Page 2 of 2 CBUAE/BSD/N/2020/2016

This Regulation is immediately effective.

Any queries you may have should be submitted via the following email address: bsed.basel@cbuae.gov.ae

Please bring this Notice to the attention of the board of directors of your institution at the next board meeting.

Yours faithfully,

For/ Deputy Governor for Banking Supervision

Encl. Circulation or Copying of this Document and its enclosures outside the FI is Prohibited