Bad debts at UAE's top banks reach Dh45 bil­lion

The Pak Banker - - COMPANIES/BOSS -

Peo­ple's bor­row­ings are still on the rise in the UAE, but the amount of bad debts - the ones that are left un­paid by delin­quent bor­row­ers - is de­creas­ing, thanks to strin­gent mea­sures im­posed by banks in the coun­try.

As of June 2015, UAE res­i­dents bor­rowed a to­tal of Dh1.178 tril­lion from ten ma­jor banks in the coun­try, up from Dh918 bil­lion in the same pe­riod last year.

While loans are grow­ing at an "alarm­ing rate", the non-per­form­ing loan (NPL) ra­tio, the amount of bad credit over to­tal loans, dropped from 7.59 per cent in De­cem­ber 2011 to only 4.21 per cent in June, ac­cord­ing to the data com­piled by the Na­tional Bank of Abu Dhabi (NBAD). That's about Dh45 bil­lion out of the to­tal loans. Alp Eke, di­rec­tor and se­nior economist at the NBAD eco­nomic depart­ment, said the num­bers, though they rep­re­sent only ten banks in the UAE, clearly il­lus­trate that the amount of bad debts in­curred by the coun­try's lenders have re­duced in size.

The trend is largely due to the num­ber of UAE reg­u­la­tions that pro­mote pru­dent bor­row­ing or lend­ing prac­tices. The UAE's Al Eti­had Credit Bureau has been set up to com­pile all the nec­es­sary data for bor­row­ers in the coun­try. The Cen­tral Bank of the UAE has also re­cently set up new reg­u­la­tions on liq­uid­ity risk man­age- ment for banks, which are in line with the Basel Com­mit­tee for Bank­ing Su­per­vi­sion rec­om­men­da­tions.

"The ab­so­lute size of bad debts and the NPL ra­tio is de­creas­ing be­cause of many fac­tors, mainly be­cause of new reg­u­la­tions by the Cen­tral Bank, Basel com­pli­ance re­quire­ments and im­prov­ing econ­omy," Eke told media.

In the last few years, thou­sands of res­i­dents in the coun­try were caught in mount­ing loans and credit card debt. Eke said the re­cent de­cline in non-per­form­ing loans is not be­cause UAE res­i­dents have be­come more re­spon­si­ble with their loan re­pay­ments.

"Ac­tu­ally, it is the lenders and reg­u­la­tors who have be­come more care­ful. The new reg­u­la­tions and com­pli­ance re­quire­ments are help­ing. Credit bureau has re­cently been es­tab­lished, con­sumer data is be­ing com­piled. Lenders are be­com­ing more sys­tem­atic in their de­ci­sions," Eke said. "I don't think UAE bor­row­ers have learned the les­son. The com­mon con­sumer has short mem­ory and doesn't think long term. It is mainly be­cause of care­ful or more sys­tem­atic lend­ing method­olo­gies and stricter reg­u­la­tions."

The loans data are for the UAE's top banks: Emi­rates NBD, NBAD, First Gulf Bank, Abu Dhabi Com­mer­cial Bank, Union Na­tional Bank, Mashreq Bank, Abu Dhabi Is­lamic Bank, Dubai Is­lamic Bank, Na­tional Bank of Ras Al Khaimah and Com­mer­cial Bank of Dubai.

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