The Central Bank of the UAE discussed the impact of interest rate increases on the country's financial sector and approved the recommended solutions to limit the impact on people paying mortgages, state news agency Wam reported on Thursday.
The bank's board of directors held a meeting led by Sheikh Mansour bin Zayed, Vice President, Deputy Prime Minister, Minister of the Presidential Court and chairman of the Central Bank of the UAE.
The central bank has maintained its benchmark borrowing rate as the US Federal Reserve paused its tightening cycle after having increased interest rates to their highest level in 16 years to tame inflation and restore price stability.
The Fed, which increased its benchmark rate for the tenth consecutive time last month, maintained its range of 5 per cent to 5.25 per cent.
Most central banks in Gulf Co-operation Council countries follow the Fed's policy rate moves due to their currencies being pegged to the US dollar, with Kuwait the only exception in the six-member economic bloc as its dinar is linked to a basket of currencies.
The UAE Central Bank kept its benchmark borrowing rate, its base rate for the overnight deposit facility, at 5.15 per cent.
During the meeting, the central bank approved the new regulatory framework for the short-term financing service “buy now pay later”, Wam reported.
It also approved the policy on processing breaches of anti-money laundering procedures, in line with the standards issued by the financial action task force.
The board also approved the issuance of systems, legislation and policies aimed at supporting the financial and insurance sectors, Wam said. These include the large exposure guidelines, as per the latest benchmarks issued by the Basel Committee on banking supervision.
The meeting focused on various issues, including plans to develop and enact green financing initiatives, the implementation of sustainability strategies in the financial sectors, active participation in the “Year of Sustainability” initiatives and supporting efforts related to the UAE's hosting of Cop28.
It also reviewed the new Emiratisation policies of institutions operating in the banking, financial and insurance sectors.
The board also discussed the latest developments related to the first phase of the implementation of the Central Bank Digital Currency strategy.
In March, the central bank began enacting its digital currency strategy, Digital Dirham, as it prepares the country's infrastructure for the future of finance.
It signed an agreement with Abu Dhabi's G42 Cloud and digital finance services provider R3 to be the infrastructure and technology providers, respectively, for the implementation of the Central Bank Digital Currency.
