The CEO of UAE-based Noor Islamic Bank said it will take three to five years to comply with new central bank regulations requiring lenders to limit their exposure to state entities in the Gulf state.
The new lending rules, imposed by the regulator earlier this year, stipulate that banks may not lend more than 100 percent of their capital to government institutions or higher than 25 percent of their capital to any state-related entities.
Hussain Al Qemzi, CEO of Sharia lender Noor Islamic Bank, told Arabian Business that the “timeframe is challenging”. The bank’s exposure to government-related entities includes state-owned investment vehicle Dubai Group.
“Like any bank in the UAE we have a level of exposure,” Al Qemzi said. “It is doable, but give us time to release these assets – it will take us three to five years.” Banks were required to comply with the new lending limits by the end of September, although the deadline was extended by six months.
“I am not the only one, many other CEOs in the banking community think the timeframe is challenging,” he added.
The ceilings introduced by the UAE Central Bank are intended to help reduce the debts incurred by government-related businesses prior to Dubai’s property crash in 2008-2009. Mashreq, the UAE’s second largest bank by market capitalisation, has said it is already complying with the rules, while others including Emirates NBD and Abu Dhabi Commercial Bank want the deadline extended.
A spokesperson for Noor Islamic Bank denied the lender was close to an agreement with creditor Dubai Group on the restructuring of US$6bn worth of debt following more than two years of talks.
Last week, Bloomberg reported that law firm Linklaters was drafting a final accord on behalf of Noor along with Dubai-based Emirates NBD with a final deal potentially being agreed in mid-December. Bloomberg said the agreement stipulated interest of 1 percent to 2.5 percent and had been proposed by Dubai Group earlier in the year.
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