Will they, won't they? UAE banking reform in Quagmire
The Emirates Banks Association (EBA) asked the UAE Central Bank for a six-month extension on its deadline to comply with the new regulations in August, however the deadline has passed and the Central Bank has given no clear indication of whether authorities will enforce the new rules or give banks more time.
Under the new rules, laid out in April, banks in the UAE can’t lend more than 100 per cent of their capital to local governments or GREs. Lending to a single borrower is limited to 25 per cent. There was no limit before this rule was announced.
The exposure of lenders in the UAE is higher than the new limit set by the Central Bank, and banks fear it would harm the economy to try and sell off the loans quickly.
However, the Central Bank has not formally granted an extension to comply with the new rules, and a meeting between commercial banks' CEOs and central bank officials on 25 September failed to clarify the situation. In the meantime, banks currently in breach of the rules do not expect to be sanctioned, and are still hoping for a waiver or delay to implementation.
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