A much-awaited development: UAE aims to dodge another real estate bullet with new credit bureau
The UAE’s federal credit bureau has formally begun operations in the UAE following a Cabinet Resolution by His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, on Sunday.
Al Etihad Credit Bureau, first proposed in the wake of the 2008 global financial crash, will provide borrowers’ credit histories to a wide range of clients.
The bureau’s establishment has been eagerly awaited by risk-averse lenders, who have attached high expectations to its potential to curb bad credit.
A senior Abu Dhabi-based banker said if the bureau had existed pre-2008, much of the crash’s pain may have been avoided.
“UAE banks at the time had piled up huge non-performing loans after lending generously in the pre-financial crisis period from 2005-08,” said the banker, who was not authorised by his employers to comment publicly.
Had the credit bureau existed back then, those same banks could have avoided much of the NPLs, he said.
Now there was liquidity in the financial system again, and demand for credit was soaring. The new credit bureau would help banks get background information on potential borrowers and help speed up the approval process, the banker said.
Notification of the resolution, No 16 of 2014 regarding the by-law of Federal Law No 6 of 2010 concerning Credit Information, was published on the website of Shaikh Mohammed bin Rashid Al Maktoum.
The website said government agencies, banks, commercial and professional establishments, cooperative associations and the offices and branches of foreign companies registered in the UAE were among the entities that could request and obtain credit information from the bureau.
Front companies and any organisation prohibited by the credit bureau would not benefit from the resolution, it said.
After the financial crisis of 2008, the UAE decided to plug the gaps in the financial system that had contributed to credit defaults.
In order to have up-to-date information on borrowers, the government decided to establish a credit bureau, to provide a detailed credit history of individual and institutional borrowers.
UAE bankers widely welcomed the formal start of operations by the credit bureau yesterday. They said it would help “carry out due diligence for creditors, before deciding on a loan request”.
A credit information report from the bureau will include any history of default payments or refusals to pay. Any judicial decisions issued against the borrower will also be included.
The report will not include the value of mortgaged assets or any investments made by the borrower with the service provider.
The credit information report will only cover the period specified by the credit report request — and this period will be limited to five years from the date of application.
The resolution prohibits collecting, registering, classifying, sharing, publishing or trading in any of the information included in the report or any personal information related to the individual.
Al Etihad Credit Bureau began collecting data last month when it asked banks and financial institutions to hand over their customers’ credit data for the past two years, along with their Emirates ID details.
The applicant and the person under inquiry may complain against any mistakes mentioned in the report by following through a specified procedure.
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