UAE banking rules criticized, government revision soon to come out
The United Arab Emirates' central bank had planned to ease curbs imposed on commercial banks as to their exposure to state-related debt. The central bank allowed these banks five years to comply with the set rules after complaints came from the banking community as to the possible negative effects of the the compliance upon their business.
The rules to be enforced are part of an overall plan in the reduction of risk for banks as well as the prevention of any repeat of the 2009 to 2010 corporate debt crisis that crippled Dubai. So, last year, the central bank had announced the required compliance from these financial institutions to be completed by the end of September 2012 in order to restrict their lending and debt exposure to government and government-related companies and/or corporations.
Each bank would be required to set a limt to lending at 100% of its capital base, within individual lending capped at 25% of capital base. After vigorous lobbying from the banks, the said rules were suspended by central bank governor Sultan Nasser al-Suweidi on Tuesday and an outline of the watered down rules to be applied to the industry,