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Thu 23 Aug 2012 12:30 PM

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UAE banks ask for delay on new GRE exposure rules

Report claims that Emirates Banks Association wants 6 months’ grace from central bank over lending limits

UAE banks ask for delay on new GRE exposure rules
The Emirates Banks Association (EBA) plans to ask the UAE Central Bank to extend its deadline to comply with regulations aimed at curbing their exposure to government-related entities (GREs) by six months (Getty Images).

The Emirates Banks
Association (EBA) plans to ask the UAE Central Bank to extend its deadline to comply
with regulations aimed at curbing their exposure to government-related entities (GREs) by
six months, Al-Khaleej newspaper said.

The banking association said
the exposure of lenders in the Gulf state is higher than the limit ordered by
the central bank, the newspaper said citing a study by EBA.  

The central bank in April
set new limits of 100 percent of the capital base for all lending by a bank to
governments of the federation and their non-commercial entities, and 25 per
cent to individual borrowers. No such limits existed before.

Lenders have until Sept 30
to comply with the rules.

The International Monetary
Fund in March urged the UAE to enforce limits on bank exposure to
government-related entities. Protecting the banking system from further
government-related entity risks would be key, the IMF said in a report.

“Some of these exposures are
not consistently classified across banks' balance sheets and government fiscal
accounts, which could lead to non-transparency in bank regulatory compliance,”
it said. 

“There is a risk that GREs
could increasingly turn to domestic banks for their funding needs in the period
ahead in case they face difficulties in external market financing. The mission
stresses the importance of avoiding channeling bank funding to non-viable GREs
in order to maintain the integrity of the banking system,” it added.

UAE banks net exposure to
government and public institutions increased by AED44bn (US$11.9bn) in 2011, or
3.5 percent of GDP, said the IMF.

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Mike DeLonghi 8 years ago

Please link this article to todays piece under severe downward adjustments in property valuations in Dubai. All of the UAE banks have government linked toxic assets. They are unsustainable both in volume and asset quality. Them asking for time out putting their hand in the sand.