More bounced cheques if practice decriminalised, says Mashreq Bank CEO
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