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Monetary Policy and Domestic Markets

Our Monetary Policy Mandate

The Central Bank of the UAE is mandated to define and implement its monetary policy objectives through the formulation of the Dirham Monetary Framework. By developing and deploying related liquidity management facilities, the CBUAE is able to maintain the soundness and stability of the established monetary system in the UAE.

Monetary Policy Governance

The Monetary and Reserve Committee (MRC) governs decisions on monetary policy and domestic market operations, and is responsible for maintaining the soundness and stability of the UAE’s monetary system. Its specific responsibilities are listed below:

Framework and Policies
  • Propose changes to the monetary system and/or Dirham Monetary Framework for approval by the Board of Directors (BoD).

  • Approve issuance programmes for monetary bills and other securities.

  • Propose terms and conditions on government advances and other credit facilities for BoD approval.

Tools and Parameters
  • Approve the average overnight liquidity surplus target for the conduct of open market operations.

  • Approve and announce changes in the base rate and related standing facility rate.

  • Approve the parameters for the deployment of monetary policy tools in the domestic money market.

  • Approve risk and control guidelines and arrangements for collateral management.

  • Approve the appointment and de-licensing of primary dealers.

Policy Assessment
  • Monitor and assess the effectiveness of past monetary management decisions and actions.

  • Ensure that all necessary internal processes for monetary policy are in place, and executed efficiently.

  • For the Monetary Policy Department, approve the addition of new projects and/or the deletion/amendment of existing projects in the approved operational plan, as per the Delegation of Authority.

  • Evaluate the effectiveness of monetary transmission in the UAE, and review market and economic data releases.

Reporting
  • Approve guidelines for public announcements and reports on monetary management stance/decisions.

About the Monetary System in the UAE

Monetary Policy Objectives

One of the key objectives of the CBUAE stated in Decretal Federal Law No. (14) of 2018, ‘Regarding the Central Bank & Organisation of Financial Institutions and Activities’, is to maintain stability of the national currency within the framework of the monetary system.

The CBUAE is responsible for determining:

  • The objectives of monetary policy and the structure of the monetary system; and
  • Monetary policy tools and related operational means for achieving its policy objectives, including those related to management of the Dirham exchange rate and money markets in the UAE.

 

About the Monetary System in the UAE

Dirham Monetary Framework

The Dirham Monetary Framework (DMF) is a key initiative introduced by the CBUAE in 2017 for the purpose of enhancing monetary policy implementation and developing money markets in the UAE.

Dirham Monetary Framework
full image

Domestic Market Operations

The CBUAE undertakes operations in the domestic money markets in order to ensure alignment of overnight interbank rates with the Base Rate and to facilitate the smooth functioning of the monetary system. Such operations include Standing Credit Facilities, Liquidity Insurance, and Open Market Operations (structural and fine-tuning).

Benchmark Rates and Indices

  • Base Rate

    The Base Rate is the prevailing official monetary policy rate of the CBUAE. The Base Rate, which is anchored to the US Federal Reserve’s Interest on Reserve Balances (IORB), provides an effective interest rate floor for overnight money market rates in the UAE.

     

    Notice to banks

     

  • Dirham Overnight Index Average (DONIA)

    DONIA is the volume weighted money market rate for all funding transactions of one business day maturity of AED 10 million or greater, secured and unsecured, contracted by all banks operating in the UAE, captured through the domestic Real Time Gross Settlement system – UAEFTS.

    DONIA is published on UAE business days, at 9:30 hours local time.

     

    DONIA Term Sheet

    Notice to Banks

  • Emirates Interbank Offered Rate (EIBOR)

    EIBOR is the daily reference rate at which EIBOR Panel Banks are able and willing to access UAE Dirham funding, in reasonable market size for a given tenor, from the domestic money markets, before 11:00 UAE time.

     

    EIBOR Regulations

Treasury Bond Programme

Decretal Federal Law No (9) of 2018, Regarding Public Debt mandates the Public Debt Management Office of the Ministry of Finance to co-ordinate with the CBUAE on the management of issuance and sale of Treasury Bonds, Treasury Bills and other government securities denominated in UAE Dirhams. In this regard, the CBUAE acts as Registrar, Auction Agent, Issuing Agent and Paying/Calculation Agent.

Find out more about the Federal Debt Management Office

Notices, Press Releases and Publications

EIBOR

Amendments to the regulations regarding Interbank Rate Submissions (EIBOR Regulations) which were published on 15 April 2018.

Islamic CDs

The offer of Shari’ah-Compliant CDs based on Murabaha, from 4 November 2010.

Overnight Deposit Facility (ODF) and Base Rate

The introduction of a new deposit facility, named Overnight Deposit Facility (ODF), enabling conventional banks operating in the UAE to deposit their surplus liquidity at the CBUAE overnight, dated 5 July 2020.

Statutory Reserve Requirements

Regulations regarding reserve requirements for deposit-taking licensed financial institutions, dated 22 October 2020.

Monetary Bills

The introduction of a new securities issuance programme, named Monetary Bills (M-bills), effective from 11 January 2021.

Consolidation of Standing Credit Facilities Rates

The consolidation of rates applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities into a unified rate, at 50 basis points above the Base Rate, effective from 24 January 2021.

Intraday Liquidity Facility (ILF)

The introduction of a new liquidity management facility, named Intraday Liquidity Facility (ILF), effective from 21 April 2021, and part of the implementation plan of the new Dirham Monetary Framework.

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Last updated on: Thursday 28 July 2022

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