UAE banks warned to help write off citizens' debts

(Photo for illustrative purposes only)

(Photo for illustrative purposes only)

Commercial banks in the UAE, a major financial hub, have been warned to help write off the debts of UAE citizens or face punitive measures, local media reported on Thursday, quoting a senior government official.

Banks must cooperate with the Debts Settlement Fund, a state-backed initiative set up in early 2012 to help heavily indebted Emiratis, said Ahmad al Zaabi, deputy minister for presidential affairs.

"We advise the banks that have not cooperated yet with the fund to do so," he said.

"If they continue to refuse to cooperate we will contact the Central Bank to publish the names of these banks. Decisions will be issued for the government to not cooperate with these banks," he added, The National newspaper reported.

He did not specify how many banks had failed to cooperate. The UAE banking industry federation and the central bank declined to comment on the reports, while a spokesman for the Debts Settlement Fundcould not be contacted.

Under the initiative, banks have to waive 50 percent of debtors' loans while the other half is settled by the 10 billion dirham ($2.7 billion) fund.

The fund has so far settled debts of 2,700 applicants out of a total of 6,000, paying more than 1.8 billion dirhams to banks, al Zaabi said at the opening of the fund's headquarters.

UAE nationals secured massive personal loans from banks during the boom years of 2003 to 2008, but found themselves struggling to repay debt after a financial downturn and real estate market crash.

Since then, the government has initiated a raft of welfare measures for UAE citizens, who are believed to account for fewer than 20 percent of a population which is as large as about 9 million people.

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Posted by: SA1

And the banks will recoup the lost of these defaulters through more charges and heavy-handness on the exapts.

How can someone live with such guilt? If you owe you need to would have been atleast fine if 100% debt is beared by the govt...but it is not...only the banks will be compelled to recover these amount from their other customers. So in-effect there are others who will be financing them.

This only goes on to show, that expats have to be very careful in bank loans. Investment in such climate however appealing will only turn sour.

Posted by: debbie

i wonder what the IMF would think about this and credit rating for UAE?

Posted by: Omar

I love the UAE and its people, and I am concerned about the course of its development. If the benevolent rulers look at themselves as caring parents over their children, then they are clearly spoiling them. This type of "rescue" does not help build financial responsibility and independence. I would think that the government would be well served to put in place measures to avoid the debt in the first place, rather than than paying off the debts after they have occurred.

Posted by: Telcoguy

@Omar, you may want to read the article better. Banks will be forced to waive 50% of the debts. If this is not a massive breach of contract, please explain

The UAE government can do anything they wish with their money, yes this is a very bad idea with only one single positive effect (and we all know that) but here we are forcing 50% of this in private companies (the banks) You can draw your conclusions about how sound is to do business here (and before all the RTA, i.e. Road-To-Airport posts come, I do no business with UAE entities, thank you very much)

Posted by: Hareez

The Govt should also waive off small amounts defaulted by using credit cards by Foreigners/Expatriates. This will be a welcome move by the Government of the UAE to help the foreigners/expatriates who got indebted and defaulted in small amounts.

Posted by: John

"If they continue to refuse to cooperate we will contact the Central Bank to publish the names of these banks. Decisions will be issued for the government to not cooperate with these banks," Isn't that would be called blackmailing!!!!

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