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.
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.
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.
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
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.
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.
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.
Marginal Lending Facility/ Collateralized Murabaha Facility (MLF/CMF) Rate
The MLF/CMF Rate is the cost of drawing on the Standing Credit Facilities of the CBUAE: the MLF and the CMF. These are funding facilities where eligible counterparties may, at their own discretion, access CBUAE reserves on an overnight basis. The MLF/CMF Rate is fixed at a spread above the Base Rate, where the spread is as determined and published, from time to time, by the CBUAE.
Notices, Press Releases and Publications
Amendments to the regulations regarding Interbank Rate Submissions (EIBOR Regulations) which were published on 15 April 2018.
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.
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.
Statutory Reserve Requirements
New measures Regarding Reserve Requirements, dated 14 February 2023.
Last updated on: Friday 23 February 2024
Total visitors 18559