The United Arab Emirates Central Bank said on Monday it will introduce a new overnight deposit facility as of July 12 which will reflect the monetary policy of the regulator.

The facility will allow conventional banks operating in the country to deposit their surplus liquidity at the central bank on an overnight basis.

It will be “the prime facility for managing surplus liquidity in the UAE banking sector prior to the launch of the Monetary Bills Program and shall replace issuance of one-week Certificate of Deposits,” the bank said.

The general stance of the central bank’s monetary policy will be signaled through the interest rate of the new facility, which will become its main policy rate and will be referred to as “Base Rate.”

In normal market conditions, money market rates are expected to hover around the Base Rate, which will be anchored to the interest rate on excess reserves of the US Federal Reserve.

“The introduction of this new facility is a reflection of the CBUAE’s continuous efforts to achieve the objectives of its monetary policy and to foster money market developments in the UAE,” said Abdulhamid Saeed, governor of the central bank.