Banks in the United Arab Emirates are likely to get about five years to conform to new large-exposure rules which the central bank will impose, the head of the banking industry association said on Monday.
In an effort to prevent any repeat of Dubai’s corporate debt crisis, the UAE central bank plans to restrict the amount of exposure banks can have to the debt of government-related entities.
The rules will be issued by the end of this year and banks are expected to be given about five years to finish complying with them, Abdulaziz al-Ghurair, Chairman of the UAE Banks Federation, told reporters on the sidelines of a financial conference.
The central bank tried to introduce such rules last year but suspended them after banks complained their business growth would be slowed and they could suffer losses if they were forced to unload some of their state-linked loans quickly.
A period of consultations between the central bank and commercial banks ensued. Asked on Monday if the new rules would be different from the old ones, Ghurair said: “There’s always give and take.”
Last week, the UAE central bank issued restrictions on mortgage loans in order to limit speculation in the real estate market; the caps were not as stringent as initially planned because of lobbying by the banking industry.