UAE banks di­rected to book Dubai World pro­vi­sions

The Pak Banker - - Company& -

DUBAI: The United Arab Emi­rates' Cen­tral Bank has di­rected lo­cal banks with ex­po­sure to in­debted con­glom­er­ate Dubai World to make "ap­pro­pri­ate" pro­vi­sions in con­sul­ta­tion with their au­di­tors, ac­cord­ing to Alara­biya web­site.

Banks in the UAE with ex­po­sure to the state-linked firm had made pro­vi­sions over the last year with­out spe­cific guide­lines. The Cen­tral Bank re­leased guide­lines early last month di­rect­ing banks to take pro­vi­sions for bad loans on a quar­terly ba­sis, in an ef­fort to bring the bank­ing sys­tem in line with in­ter­na­tional stan­dards.

The lat­est cir­cu­lar sent to banks in the last week of Novem­ber comes two months af­ter Dubai World reached an agree­ment with cred­i­tor banks to re­struc­ture $25 bil­lion in debt and re­solve a debt cri­sis that roiled global mar­kets last year. "The cir­cu­lar ef­fec­tively means it is now left to in­di­vid­ual banks to work out their own size of pro­vi­sions in con­sul­ta­tion with their au­di­tors," an ex­ec­u­tive of an Abu Dhabi based bank told Reuters.

Ac­cord­ing to a re­port from the lo­cal Ara­bic daily AlKhaleej, the cir­cu­lar also said banks with ex­po­sure that did not make pro­vi­sions in the third quar­ter would have to do so by the fourth quar­ter, and that the pro­vi­sion­ing could not be de­layed and added to yearend prof­its and losses cal­cu­la­tions.

An­other Dubai-based banker, who con­firmed the re­lease of the lat­est cir­cu­lar, said the onus was now on banks to de­ter­mine how much pro­vi­sions to book based on their ex­po­sure. -PB News

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