UAE banks asked to raise loan loss pro­vi­sions up to 80pc

The Pak Banker - - Front Page -

DUBAI: The UAE Cen­tral Bank has asked lo­cal banks with ex­po­sure to two Saudi con­glom­er­ates to raise their loan loss pro­vi­sions up to 80 per cent, ac­cord­ing to its cir­cu­lar.

The two fam­ily-owned busi­nesses - Saad Group and Ah­mad Ha­mad Al­go­saibi & Bros. - are en­gaged in a se­ries of le­gal dis­putes with lo­cal and in­ter­na­tional cred­i­tors in­volv­ing up to $22 bil­lion of debt d locked in a com­plex le­gal dis­pute in­volv­ing up to $22 bil­lion of debt.

"All these pro­vi­sions must be al­lo­cated by the end of 2010 and the Cen­tral Bank's ap­proval of the banks' an­nual au­dited re­sults are con­di­tional on the al­lo­ca­tion of those pro­vi­sions," the Cen­tral Bank Gover­nor Sul­tan Nasser Al Suwaidi said in the cir­cu­lar.

"It was not un­ex­pected," Mohamed Ali Yassin, chief in­vest­ment of­fi­cer at CAPM In­vest­ments, told Khaleej Times. I think most of the bans have al­ready taken more than 70 per cent of their loan pro­vi­sions, Yassin said.

The cen­tral bank fur­ther in­structed that len­ders take 100 per cent pro­vi­sions on ex­po­sure to The In­ter­na­tional Bank­ing Cor­po­ra­tion (TIBC), and Awal Bank, sub­sidiaries of Al­go­saibi and Saad, re­spec­tively, which were taken over by the Bahraini cen­tral bank in 2009. Last year, the cen­tral bank told banks to take pro­vi­sions worth 50 per cent of their ex­po­sure to the two Saudi firms by the end of 2009. A Kuwaiti news­pa­per said on Sun­day that Saad Group was of­fer­ing its len­ders 20 cents in the dol­lar against out­stand­ing obli­ga­tions with in­di­ca­tions that some Kuwaiti len­ders would ac­cept be­tween 30 and 40 cents.

The move is not new as at the end of last year the group did a deal with Saudi based len­ders re­pay­ing around $2.6 bil­lion, a de­ci­sion which ir­ri­tated many in­ter­na­tional banks. -PB News

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