More bounced cheques if prac­tice de­crim­i­nalised, says Mashreq Bank CEO

The Pak Banker - - COMPANIES/BOSS -

The num­ber of bounced cheques would rise if the UAE de­crim­i­nalised the prac­tice be­cause cit­i­zens would not be so care­ful. That is the view of Ab­dul Aziz Al Ghu­rair, the CEO of Mashreq Bank.

In an in­ter­view, Al Ghu­rair ar­gued that the UAE would be wrong to de­crim­i­nalise bounced cheques -a move it is con­sid­er­ing through the in­tro­duc­tion of a new law to mit­i­gate the risk of bank­ruptcy. On July 7, media re­ported that a draft law on fi­nan­cial reg­u­la­tion and bank­ruptcy had moved a step closer to be­ing en­acted af­ter it was ap­proved by the coun­try's cab­i­net.

The new rules aim to "reg­u­late ac­cu­mu­lated debts, ease restruc­tur­ing of com­pa­nies and sup­port trou­bled busi­nesses", UAE Prime Min­is­ter and Ruler of Dubai, Sheikh Mo­hammed, was quoted as say­ing.

But Al Ghu­rair said bounced cheques at present con­sti­tute a neg­li­gi­ble pro­por­tion of the to­tal num­ber of cheques is­sued in the UAE - around 4 per­cent, he claimed.

"The gov­ern­ment keeps talk­ing about this, but I think we over-ex­ag­ger­ate the sig­nif­i­cance of a small num­ber of cheques bounc­ing on the wider econ­omy. "Let me give you some sta­tis­tics. In 2014, 32 mil­lion cheques were is­sued [across the UAE], to­talling AED1608 bil­lion. Bounced cheques con­sti­tuted around 4 per­cent of this, which is about AED1.3 mil­lion. So it's not huge."

Cheques bounce for sev­eral rea­sons: be­cause the sig­na­ture doesn't match; the is­suer has writ­ten the wrong date, or, in around 1 per­cent of cases, be­cause the is­suer has in­suf­fi­cient funds in their ac­count. This is a small pro­por­tion but one that would in­crease if le­galised, Al Ghu­rair ar­gued.

"Peo­ple wouldn't take enough care. And it would change peo­ple, the way they work, they way they do busi­ness.

"[For ex­am­ple], if I was a land­lord, when you come to me with your cheque I'd say, ok I'll give you one month's lease; I'm not go­ing to give you a year. The ten­ant would say, but I've al­ready bought these cur­tains, but I say no, I don't know if you are go­ing to hon­our your com­mit­ment. "The ten­ant says, I prom­ise to pay you, but later he says sorry [he can­not, and the cheque bounces]. And then what? It takes me a year to get you out of your apart­ment; I have to go through this lengthy le­gal process, and I'm still out of the money

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