A bank can meet every liquidity ratio its regulator sets and still be unable to answer the question the ILAAP asks, because the ratios are the regulator’s view of the bank’s liquidity and the ILAAP is the bank’s own. That distinction is the whole subject, and it is the same distinction that separates the ICAAP from the capital ratios. Most people searching for the difference between the two processes already understand one of them. The shortest honest answer is that the ILAAP is the ICAAP with the word capital replaced by the word liquidity, and the horizon shortened from years to days.
For a bank in the UAE the more useful question is the second one: what does the Central Bank actually require? The answer has three parts that have to be held together. The CBUAE requires an ILAAP. It has not yet defined one. And the definition is in draft with banks now.
What each process asks
The Internal Capital Adequacy Assessment Process asks whether the bank’s capital is adequate to absorb the losses its risk profile could produce, assessed over a multi-year horizon, typically three years in the CBUAE’s guidance, and written up for the supervisor as part of the Supervisory Review and Evaluation Process. Its output is capital under stress and the headroom to the trigger. Its mitigating instrument is the capital plan.
The Internal Liquidity Adequacy Assessment Process asks whether the bank can meet its obligations as they fall due, in normal conditions and under stress, assessed across horizons from intraday to a year. Its output is a survival horizon, a funding gap by maturity bucket, and the cushion of liquid assets that remains after the stress. Its mitigating instrument is the contingency funding plan.
Both belong to Pillar 2. Both are the bank’s own assessment rather than a regulatory calculation. Both sit above a floor of ratios the bank must meet regardless: Pillar 1 capital ratios under the ICAAP, and the liquidity ratios under the ILAAP. And both share an internal pricing mechanism that makes the assessment real inside the business: economic capital allocation on one side, funds transfer pricing on the other.
A bank can be fully compliant with LCR and NSFR and fail its ILAAP, because the ratios are calculated on the supervisor’s assumptions and the ILAAP has to show how the bank knows it is liquid under its own.
The term itself is European. The European Banking Authority’s 2016 guidelines on ICAAP and ILAAP information, and the European Central Bank’s 2018 guide to the ILAAP, fixed what the document contains: governance, risk appetite, identification and measurement of liquidity and funding risk, stress testing, the contingency funding plan, funds transfer pricing, and the bank’s own conclusion on whether its liquidity is adequate. Supervisors elsewhere have adopted the structure with local variations, and the GCC is in the middle of doing so.
Where the two meet
The CBUAE is explicit that the two processes cannot be run as separate annual projects. Paragraph 101 of its ICAAP Guidance says the ICAAP and the ILAAP “are expected to inform each other; with respect to the underlying assumptions, stress test results, and forecasted management actions.” Paragraph 102 gives the mechanism: a deterioration in capital projected in the ICAAP, or a downgrade by a rating agency, has direct implications for the bank’s ability to refinance, and a change in funding cost feeds back into capital adequacy.
The practical consequence is that the liquidity stress scenarios have to be built from the same scenario set as the capital ones. A bank whose ICAAP models a regional property decline and whose liquidity stress models a generic deposit run has two exercises that do not reconcile, and a supervisor reading them together will notice. The Guidance Manual for the liquidity regulation makes the same point from the other direction: among the scenario considerations it lists “the results of stress tests performed for various other risk types” and “possible interactions between liquidity risk and these other types of risk (e.g. capital stress tests).”
The CBUAE position, exactly
Three facts, each from the primary source.
The CBUAE requires an ILAAP. Paragraph 101, quoted above, treats it as existing. The Large Exposures Regulation requires banks to cover concentration risk “in their ICAAP and ILAAP.” A bank that told its supervisor it had no ILAAP would be told to produce one.
The CBUAE has not defined an ILAAP. Paragraph 5 of the ICAAP Guidance, in force since 1 April 2021, says: “the Central Bank plans to issue separately detailed requirements relating to the Internal Liquidity Adequacy Assessment Process (ILAAP).” As at 13 September 2026 no such requirements appear on the CBUAE Rulebook, and the Central Bank’s public consultation page lists no open consultation on the subject.
A draft exists and is with banks. Advisory firms working with UAE banks referred publicly in 2026 to a draft ILAAP reporting guideline recently released by the CBUAE. A draft circulated to banks for comment ahead of a Rulebook entry is the Central Bank’s usual path, and nothing about it is unusual. It is real. It is not public. Nothing in this article draws on its contents, because we have not seen them.
The reconciliation is that the substance of an ILAAP is already required in the UAE, and has been since 2015, by a regulation that never uses the word. The form is what the draft will add.
What Circular 33/2015 already requires
The Regulations re Liquidity at Banks, Circular 33/2015, effective 1 July 2015, with a Guidance Manual effective 1 December 2015, set two things. The quantitative side runs on two tracks: every bank complies with the Eligible Liquid Assets Ratio, holding 10% of balance-sheet liabilities in specified liquid assets, and the Advances to Stable Resources Ratio; banks approved by the Central Bank move instead to the Basel III Liquidity Coverage Ratio and Net Stable Funding Ratio, and once approved cannot revert.
The qualitative side is where the ILAAP lives. Article 2 sets twelve criteria for a liquidity risk management framework, and the Manual expands each. The Board bears ultimate responsibility and must articulate a liquidity risk tolerance, which the Manual defines and illustrates as the funding gap the bank accepts under normal and stressed conditions by maturity bucket. At least one Board member must have a detailed understanding of liquidity risk management. Senior management develops the strategy within that tolerance, covering the composition of assets and liabilities, the diversity and stability of funding, currencies and jurisdictions, intraday liquidity, and the assumptions on asset marketability. Liquidity costs, benefits and risks must enter product pricing and new product approval explicitly.
The Manual’s paragraph 76 lists sixteen considerations for those scenarios, and the ones a UAE programme most often omits are instructive: a simultaneous drying up of several previously liquid markets, named as inter-bank money markets, non-UAE funding markets and securitisation; contingent draws on lines extended to the bank’s own subsidiaries, branches or head office; settlement disruption in one payment system preventing flows the bank relies on in another, which the Manual flags as particularly relevant to centralised group liquidity management; rating triggers, margin calls and access to Central Bank facilities; and the likely behaviour of other market participants, including the impact of the bank’s own actions on them.
Three further requirements complete the set. A formal contingency funding plan, shared with the Central Bank on request, with the Manual requiring clear escalation criteria that define when it is invoked. A designed set of early warning indicators, of which the Manual lists seventeen, from rapid asset growth funded by volatile liabilities to correspondents cutting credit lines, monitored by senior management with escalation to the Board. And a funds transfer pricing framework reflecting the actual cost of funding.
The framework, the CFP and the stress results must all be shared with the Central Bank on request. What the regulation does not require is that they be assembled into one document, approved by the Board as a whole, and submitted on a date. That is what an ILAAP guideline adds, and it is a smaller step than it looks for a bank that has built the pieces.
Islamic banks
The Standard re Liquidity at Islamic Banks, effective 3 January 2022 with its qualitative rules in force from 30 June 2022, applies the same four ratios and the same twelve criteria with a layer that has no conventional equivalent. The Internal Sharia Supervision Committee approves every Sharia-compliant liquidity instrument and hedging product, verifies that funds are not commingled between windows, branches, subsidiaries and a conventional parent, and confirms the Sharia compliance of placements with other entities including conventional banks. The Board’s tolerance must be commensurate with the bank’s recourse to Sharia-compliant funds, and at least one Board member must understand liquidity risk management for Islamic banks specifically.
The Standard also names, among the institution-level events the Board must watch for, “significant withdrawal of deposits and investment accounts.” Unrestricted investment accounts may be commingled with the bank’s own funds and pooled; restricted accounts may not. That distinction gives an Islamic bank’s ILAAP a scenario a conventional bank does not have, because investment account holders can leave when returns are uncompetitive, not only when they fear for their principal. Banks with an Islamic window comply with the conventional regulation but report the window’s quantitative measures separately for monitoring.
What the neighbours did
The Saudi Central Bank issued its Guidelines on the Internal Liquidity Adequacy Assessment Plan on 17 October 2020, effective for 2021 submissions, and GCC regulators tend to converge. SAMA’s ILAAP is a fourteen-section document: background, executive summary, objectives, governance and risk management, a summary of strategies, the liquidity adequacy assessment itself, approach and methodology, models employed, liquidity-specific stress testing, liquidity transferability between legal entities, aggregation and diversification, challenge and adoption of the ILAAP, use of the ILAAP within the bank, and future refinements. A standalone contingency funding plan accompanies it, an annexe covers stress testing, early warning indicators and the CFP, and banks submit annually by 31 August on a 30 June reference date.
Set that list against Circular 33/2015 and the overlap is close to complete. Every SAMA section maps to a CBUAE criterion or Manual paragraph except the two on transferability between legal entities and on aggregation, and the Manual’s requirements to oversee liquidity across every entity and jurisdiction, and to identify risk in every subsidiary and branch, cover most of those. A UAE bank that built to the CBUAE criteria and wrote them up in SAMA’s order would have a document any GCC supervisor would recognise as an ILAAP.
What to build before the guideline lands
The risk of waiting for the CBUAE document is that it will set a submission date, and the first submission will be due against data the bank was not capturing. The ICAAP taught this lesson: the Guidance’s requirement for a three-year projection and for stress outcomes to enter the capital plan explicitly was hard for banks that had treated the ICAAP as a report rather than a process.
The order that makes sense, because each item is already a CBUAE requirement and each is a section of the document to come, runs like this. Write the liquidity risk tolerance down as a number, using the Manual’s own example of a funding gap by maturity bucket under normal and stressed conditions, because most banks have a sentence and the ILAAP will want a figure. Build the stress framework to the Manual’s paragraph 76, with a survival horizon as the output, and link its scenarios to the ICAAP set. Make the contingency funding plan operational: escalation criteria that name the trigger, decision-makers, pre-agreed actions with sizes and timings, and evidence it has been exercised. Instrument the early warning indicators and keep the monitoring record. Formalise funds transfer pricing, because the ILAAP will ask how liquidity cost reaches the business and a rate card is a partial answer. Record independent challenge, since both the Manual and SAMA’s twelfth section ask who challenged the assumptions and what changed. Then assemble the document, with the Board minute approving it.
When the CBUAE guideline arrives, reordering that document to its structure is a day’s work. Building its content is not, and the banks that will find the first submission straightforward are the ones that treated the 2015 criteria as a framework to operate rather than a policy to file.
This article reflects the position as at 13 September 2026, against the CBUAE Regulations re Liquidity at Banks (Circular 33/2015) and its Guidance Manual, the Standard re Liquidity at Islamic Banks (C 33/2015 STA), the CBUAE ICAAP Guidance (C 52/2017 GUI) paragraphs 5, 101 and 102, and SAMA’s Guidelines on the ILAAP (circular 42012157, 17 October 2020), each read from the issuing regulator’s Rulebook on the date stated. The CBUAE’s draft ILAAP reporting guideline is not public and nothing here relies on its contents. Requirements should be confirmed against the Rulebook and any subsequent issuance. Nothing here constitutes legal advice.