By Andy Sambidge
Dubai's second largest bank meets cenbank rules to tighten up financial system
Mashreq, Dubai's second-biggest bank by stock market value, said it has met the tougher lending rules imposed by the central bank to tighten up the financial system after the Emirates debt crisis.
The new lending rules are part of a broader move to curb the vast debts taken on by government-owned businesses in the years before the property crash in 2009. The crisis was worsened by local banks' excessive exposure to government-related entities.
In April the United Arab Emirates central bank introduced caps for loans made to local governments and their entities and asked lenders to comply with the rules by the end of September.
"We are ok. We were able to abide by the timeline," Abdulaziz Al Ghurair, chief executive officer of Mashreq, told the Reuters Middle East Investment Summit.
"Many banks don't like it but will have to adjust to it," he added.
Some of the UAE's largest commercial banks, such as National Bank of Abu Dhabi and Emirates NBD, are in talks with the central bank to extend the deadline, to avoid any damage caused by a quick sale of loans to meet the new rules.
The new rules cap lenders' exposure to government institutions in the seven-member UAE federation at 100 percent of their capital, with a further restriction that they cannot lend more than 25 percent of their capital to any state-related entity.
Lending throughout the UAE banking sector was flat at the end of August compared to the end of the second quarter, according to central bank figures. It has grown 1.8 percent since the beginning of the year.
"We expect bank lending to continue to grow and fuel the economy. There is an appetite from banks to lend now more than before," said Al Ghurair, who is also governor of the Dubai International Financial Center.
"We have gone through a challenging period over the past four years. But we have trimmed and adjusted our system."
Mashreq, which is present in Egypt, Bahrain, Kuwait, Qatar, London, New York and Hong Kong, is looking for growth in fast-developing Middle Eastern markets to satisfy investor demand for diversification.
Media reports had suggested that Mashreq was interested to buy BNP Paribas' Egyptian retail arm. Al Ghurair declined to comment on the BNP sale but said that Egypt has great potential and the bank is still focused on the North African country.
"We're always keen and interested in Egypt, but there's nothing on the surface now."