UAE Central Bank Circular No 394: Advances to Deposits Ratio

UNITED ARAB ffl.IRATES CENTRAL BANK ... ...,..,,,... y ..... TI 0 CIRCULAR NO t 394 DATE : 1 2/7 /86 TO ; ALL BANKS RE: ADl ANCES TO DEPOSITS RATIO Dear Sire, It ha.a been decided to amend tht advances to deposits ratio regulation introduced by the then Currency Board in 1977 • The purpose of this is to late the said ratio more speoifioal.ly to the measurement of liquidity. Accordingly, all banks in the U.A.E. will have to maintain a ratio not higher than 1: 1 between :-

• On one hand, the amount of loans and advances together with the amount of interbank placements with a remaining life of more than 3 months a.nd1
• on the other hand, the amount of stable resources comprising of 1 free own funds, interbank deposits reoei ved with a remaining life of more than six months and stable customer deposits. Local and foreign banks have to abide by the above .ratio for their operations in the U.A.E. However, those local banlcs with branches abroad should also comply with the same rule on a. worldwide consolidated basis.* Looal banks mey- also be requested to include banking eiubeidiaries and atfiliates a.broad in their worldwide ooneolidated Position. This will be determined on a oas&-byi,-ocase basit:i after consultation with the oonoerned banks. (*)refer to foot-note on page 4/. .................... ---- ·- ., . . ... .......... , �ti.LJl1...9)..M.ll� ��,:i. �•'-4, J..-..$ �' : ' JJ� 'J 4-' c)r- �b..JI i.JJ �I . o, ............. c L.&. I � 1i I l+i,J I ls� c l.tiW 1,u°.,,,u I ;I .>i.o ��I �b � � �l L..5J�I v-M '4,.s ♦ � 04 ;G..!.1 �)� � � ifa J o----o uP JUI ofa-Jl J1,ia 'JI J .)�) � • ¼..sJ I t5 I .lJ La-itJ 1 Lil.A. ii .,:aJ 11..-9 .,,,-J 1 J 1,ia f ij---11 J}.�.11 oo iiob oaall t;I .J,JI., ofa-t.11 o....:w � ¾P ofa '+9�1 tiub c)r- � • 1.5.,.;.t o. 8'" oo �t � 0 f � f �1 ....s, k-1 I oo � -»J �bJI �l- �1 �O"t-f u-1t, t}Wl �J J& 0WJt I� ��.u �., • o�, i.s,.f � L.J) ... .....,.JI C4 .i, u.:u I .l.A.t 4 """" c)r- aJ 6. JS' u-t-f • i 4, AA..11

(2) For the purpose of calculating the ratio the following will apply:- Loans and Advances: Loans and advances include all kinds of outstanding advances to gover:nment 7 public sector, corporate and individual borrowers; the figure is taken into account net of provisions for bad and doubtful debts and interest in suspense.

• Interba.n..� placements: Interbank placements include 8..'tl.Y amount, in whatever currency t with a remaining life of more than 3 months due from other banks in the u.A.E. or abroad, from branches abroad or from head office; placements that are regularly rolled over are included if the final maturity leaves a remaining life of more than 3 months. However, placements having a remaining life of between 3 and 6 months a.re not included if they are �atohed in maturity by an interbank deposit; CDs issued by the U.AE Central Bank are not included either, whatever be their remaining life. Free own funds conPist of total own fun�s asctefrned ey circular no.202 dated 7.6.1983, including the total amount of subordinated loan andr in case of foreign banks, the total amount of funds deposited by head office that cannot be withd.ravm without Central Bank authorization. Less;
• fixed assetsi
• funds allocated to branches abroad, when looking at the UAE position of a local bankt
• investments in subsidiaries and affiliates,
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(3)

• goodwill,
• 01.rm shares held by the bank, if the free own fundst as defined above, show a. negative figure, this will be deducted from the stable resources.
• Interbank deposits: Interbank deposits received include any amountv in whatever currency, due to other banks in the U.A.Eo or abroad, to head office or to branches abroad, with a remaining life of more than six months. Customer deposits: Customer deposits include all kinds of deposits from government� public sector, corporate and individual depositors, in whatever currency. They also include:-
• CDs issued by the bank itself1 refinancing of real estate loans in the U.,A.E .. , refinancing of loans and advances obtained abroad from the concerned Central Bank or official refinancing authority by foreign branches of U.A.E. incorporated banks, under the condition that such refinancing can be considered renewable and stable. The estimated stable portion of customer �eposits as defined above includes:-

1. 100% of refinancing obtained in the U.A.Eo and abroad;
2. 100% of all deposits with a remaining life of more than six months;
3. 85% of all other deposits. However� the Central Bank reserves the right to fix lower percentages in the case of banks th4! deposits of Nhich appear particularly volatile1 especially where concentration is abnormally high. Such lower percentages would be determined on a case-by-case basis after consultation with the concerned banks. (( r )) c1 .o,.AJI • .,,. _ __,,..I il oo o..J ,kJl o.....it clJ.+1 I ro-f J..-..,J-c1 � JJ� 41 L.. c:)al I � � lS I J lj • o;- - 1'•1 ,....JI Jl_9,0 'ii J ..)4'.l,o 04 di J o-,o � � � .l_9,0 l.'.!.1.1 IS o.kt. � 4 c} 4o ,.s 1 � i.:,:> ,f, �).:1. ..? f a.l.9 �I J:;. I .l-5� f L9; Lo.a .�-- .. .. -;1r , [J l;.J I � ,:,-9.JJ I, �) I JS .,.JI o.....-..l.w or, la-9 � I tf..; b u-1:- � I o;:iJ I • .,..... --- e..,.:.';f fLJI tlbiill; �y:.JI �I ..:1�1 t i,-; f o.9l.5 � � L:S ; � lS o.kt. � t. �1.-.... � I.? .) I ;9 �G •. t - .. ,,t;.:i . f -5;�1 d1.+II oo o; .lWI t, I � )II c.l J�'> . � • �l;la )II a.l.9 .) � a......,ULJIJ,..?JUI J:,� o .lbl J�1 f tf-!i"��l.90 .:.i;)i.ll J.,� o .)bl o.-..11-A.JI a...JS .,.JI u) .• �JI 0'l �:;1-�I Y J; l� c9.,-.J o.b..wly. �.,JI J.,�I i:i ..:1bd c.1..61.....? f .,41 � 1.!al.b A t )..;JI q9 �L.J; l,.e.cJI • )Ji:L,, 'i 4 r--°..? � � o.L. lli J..,� I o .lb I : � llL,L.. L} J W' o).1.-JI •�lc'I -l; '-&+,)-�; a.l.9 .ill JJ,.I ..:1 00 <i.ib ,...JI J.,�I a ..:1bl {) • 1/.)•• � '--e-9 � 1 � ..., b u-k � tf-11 • >hA.11 f I JJ ( , • 1. , • • � .r� 1 &t-. u-k �..;:.i ofa .. 1. A o 4,.J,.hs .t> 'ii • ¼...J 1 E 1 ..)., ( r �i.W � -.s JS .,.,JI i.J � I O IJ J L-.. 4;! f uk..? I .J..-i k I JI o � f ;; »i .1J I a..,µ I '-:-L....u I� � � .J.;:. i) 1 o JS .t>..? ofa-4 .,::Ii • ¼.AJ I e I -lJ o t. oJ o� � � � L...9J-J •.>I.a.A.II o,o ..:1, .l>.o .l ..:t. if' .!?La..:J.11 � o � uk <i..lb J5 �0"L.. f uk Jsf • o Ji �I u 1L-il -

Banks are expected -to oomply with the ratio a.t .oll timee,. In addition to random check.ings, compliance will be verified on a quarterly basis from (( l !> 0----1-.JJl.i �I dJk:..JI � 00 � V--l_µ:,,,:iJI f:! 1..9.,...,J ' c.:,�j 'JI JS cS9;;.) �, cl...-J J_,1.5J-Lwcv<YL. t c_,lr- dJ .i,J��I rl.r=Jl v-· • .n_, ol.P � I�� ��I J� oo l oJ..,. .fl J'-11 ru:z_,,i I ��AQ.) I f lftJ I � lJ l.H J )l.;. the various forms that are alreacy￾regularly supplied to the Central Bank (BRF-1, BSD--3, MA-1). However, those local banks with branches abroad are requested to fill in a new Maturity Analysis Form 2 (MA-2), to be sent shortly, regarding their worldwide consolidated position as at the end of March, June, September and December.* (B�1,B:>D•3,MA.-1 1$;S',a.JI 1.j� �.) o�L..9J�I v-----9t� loJ Jdl �IJJ� �Lt� f o.. ... :;,-J.lJI L'.:.ol.i4+Jl.i L� tG-40�� �).�I Banks that would not fall within the maximum authorized limit are requested to work towards a reduction of their loans and advances and interbank place￾ments a:nd/or towards an increase of their stable resources. The Central Bank may impose on those banks that would still be above the limit after the 31st Ilecember 1566 an int er est free reserve requirement of 2"/o of the shortfall in stable resources. Please note that compliance with the a.bove ratio will be verified for the first time from Banking Return Forms as at 30th September, 1�6. Tours fa.i !�fully, 1 ABIUL MALIK Alr••HAMAR GOVERNOR �*)Elooees of stable resources available in cowitries from which funds cannot be transferred because of exchange control regulation will not be taken into account for the purpose of computing the worldwide consolidated ratio. { MA-2 ), (9J S � �, � 'JI � <Wt .j Cl L..1 l.t+J I db (l?l:J u f � II � J-jl 1...9.,.... II �la-, t/'".h a...!r- � W' &WI if l�3.19 ii.lot:. !IE • � ..> ' .,.,.,.,.,.., f �-'I- � u .. J lo .r-G-·t 00 JS �I � jJ� J-Jl 1...9JL,c.JJ i4-i..l4 lo f ii---lljl l�� � r11.s�I ��I c,L..�l3t.fJ.,,ill �v� lol, .i.,�11 � J .)� o ..1l:t; J f 0./'•· '.ll 1..9;�1 c..5 .lJ �kl� '.ll, � Jdl l...9;k.w.JI \�lb:i .:;;, • iir�I loJl,o f rl-.. 00 � .l ci,iLGJ � �I o .ia-J oJJ4 c"..-A� .l�1.5j!,r-JI J�l1.5 -1,IJ�::,.,•J () L \ l\A, JIJ----a 'ii J .l� <:f�I JI� oo 1., � • o � ti ai .l.tj o .,.-4, .. .,, II J---,Wl �� �I O f oh:»¼ �.r-. u.J�I �l.Ji.H c,lr- J�I cL...,L... � LA} J • f \ I\ A 1 � �l(}' if � � L.S ��' ls .ll o�I JI_,, 'JI J .ll..- � o ,.)1.i�I t�} J..� c_,lr- � � .ll JU I �) .,JJI if �---- J 4=lL:. ':/1 � .ii.� oJ a..bAJI • c;- .o�L.. f � 4aUI 'rl,...l;.I ,.JI ..... ,