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Sat 17 Mar 2012 02:59 PM

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UAE banks told to reduce debt burden of nationals

Central bank move after review finds UAE nationals paying high repayment installments

UAE banks told to reduce debt burden of nationals
UAE Central Bank governor Sultan Nasser Al Suwaidi

The UAE's central bank has directed lenders in the Gulf state to help reduce the debt burden of UAE nationals, with some bankers saying banks may have to write off certain personal loans.

The central bank, after a review of personal loans, found that UAE nationals were paying high repayment installments, it said in a statement.

"To alleviate the financial burden on UAE nationals, the board instructed further study and more cooperation and coordination from concerned agencies in order to find solutions," the statement said.

It did not specify how the burden should be reduced.

Shabbir Malik, banking analyst at EFG-Hermes, said: "This is in line with other measures taken by the government to help UAE nationals in terms of debt."

In January, the UAE government said it would will settle AED2bn ($544.5m) of debt owed by nationals, including some who were detained for defaulting on loans.

"I don't expect a massive negative impact, it won't be large as the provisions standards for retail loans are quite stringent," said Malik.

But bankers speaking on condition of anonymity said banks may have to write off some debt relating to personal loans.

"It must be about waiving or writing off some loans conditionally. We need to know more details," said an Abu Dhabi-based banker involved in credit.

In the boom years, UAE banks extended huge personal loans to UAE nationals and expatriates, surpassing even limits set. But after the financial downturn and real estate crash in the UAE, many lost jobs, finding it difficult to repay loans.

Personal loans in the UAE, which has the largest Arab banking sector, surged by at least 35 percent during 2006-08 before they sharply slowed over the past three years following the 2008 global financial crisis and regional debt default problems, according to the central bank.

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Sole 8 years ago


Most of Central bank decisions and recommendations are aimed to help banks , and never clients ( we have to look into the details of the recommendation to discover that).

Such recommendations could reflect positively if it was accompanied by certain rules or initiatives from courts and police , like establishing amicable settlement department for all banking dispute and refraining from arresting or jailing defaulters or even limiting freedom restrain to impose travel ban only instead of detention, jails and arrest .

Also they should prohibit imposing any imprisonment punishment for any financial or contractual dispute and solving all the matter through other means .

Refraining from jailing defaulters or punishing failed businessmen through jail terms will encourage more entrepreneurs and young talents to explore business opportunities without been affright to end up in jail, moreover it will help the economy by providing safer business environment .

faisalsazhar 8 years ago

By writing off debts for UAE nationals would mean passing the cost to others, i.e. expats. In my opinion thats very unfair. These people who are living beyond their means would simply go and borrow more, because they know sooner or later their loans will get written off. This only encourages careless borrowing

Nuts 8 years ago

I do agree, change in the current legal set up of jail for default actually encourages banks to take the easy way out of operating based on a security cheque instead of doing proper credit evaluation. The multiples to salary of loans offered in this part of the world is one of the highest, this is primarily because the banks are comfortable in the fact that there is no bankruptcy law and the punitive jail / travel bank provisions which exist here are in favour of banks as in the absence of these laws, banks will have to lend as much as the borrower can repay and incase, their assessment is wrong, they have to book a loss.

ScotsExpat 8 years ago

Doesn't exactly teach fiscal responsibility to the local population, does it? Has anyone heard of the Whilst it may placate those calling for a fair share of the wealth within the UAE, all it is going to do is make an already 'spoiled' population find it even harder to assume personal responsibility.

...and before someone says it, I know, if I don't like it, I can leave, which is exactly what I am doing in a couple of weeks..!!

Ma'assallama...

Abdulla 8 years ago

Ma'aasallama and dont come back

expat 8 years ago

Abdulla,

That is exactly the arrogant behaviour we expect from you people. Don't worry we will all leave sooner or later and then you can start fishing as the only and original means for you.

It will be just a matter of time when you will see and feel the heat.

truth 8 years ago

ScotsExpat,

Do your own research before jumping to prejudice conclusions,

Regarding what the UAE Gov. did in Jan, there were rules for the debts that were settled : mainly debt does not exceed Dhs1m. The borrowers were incarcerated due to the debt (they are in a state that they can not pay the loan)and thus will be released but under the condition that 25% of their future salaries will be deducted until the debt is paid!

And regarding this article, nothing is set in stone, I am sure the banks wont do anything that would hurt their bottom line, and there several ways of pursuing this (restructing on lower interest, haircuts etc.) ... This happens everywhere, even on gov. level, go read about the greek debt haircut.

Red Snappa 8 years ago

I assume this very much includes being excused repayments on property loans which will be another blow to an already damaged real estate industry. Property and share trading funds were the big ticket loan items 2006 onwards.

ScotsExpat on their way, well there are many like him or her currently trying to sell up the property and move on, number of properties listed for sale online has gone up by 2,000 in 5 weeks, also some good prices I note at the moment. 2-bed Greens apptmt less than 1 million AED

Sole 8 years ago


Truth ;

What you state is only for publicity , in reality nothing changed , defaulters are still in jail and not even single one has left , negotiation between banks and central banks on the methods of how they will execute the initiative is still going on and as usual it will take years before they agree on some thing , and in reality they will only replace old loans with new one and colect new security Cheques which will again send the defaulters to jail after some time .

in the main time every thing remain the same , and defaulters are still waiting the time when CID nock their doors and take them to jails.

nothing will change unless it comes from Courts and police , the execution method should change other wise every thing remain the same and as we say you kill the gost but his spirit will comes alive.

it is illigal to jail or even threaten with jail any person due to contractual obligation , and unless banks are convinced and forced to accept that fact nothing will change.

Khadeeja 8 years ago

@ Abdulla,
I don't think you are Emirati yourself, because the real Emirati do not treat our expat population like this. I feel ashamed of your comment, it totally does not belong in today's society. Maybe you should get yourself a bit more educated if you wish to live here.