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Neither a borrower nor a lender be
Despite a slight upturn in lending, some say UAE banks are still reluctant to grant personal loans. But others believe that consumers are the wary ones.
February 24, 2010 4:11 by Aarti Nagraj
“This increase is natural since there is a crisis in the world and there is a deterioration in rent prices,” Saeed Abdullah al-Hamiz, senior executive director of the banking supervision department at the central bank, told reporters, adding that banks will be told to write off the bad debts. The central bank has also just passed a new regulation changing the classification of a NPL, stating that a loan that has not been paid in 90 days, rather than the 180 days it was earlier, will be considered a NPL.
“We believe that 2010 will be another difficult year for Gulf banks as they continue to clean up their loan books — an effort that will weigh on their financial performance,” rating agency Standard and Poor’s said in a report earlier this week.
However, some analysts say that despite all the talk of NPLs, banks still have plenty of liquidity. Speaking at the Abu Dhabi Economic Forum on Tuesday, Mohammed Ali Yasin, CEO of Shuaa Securities, said that banks in the region “benefitted” a lot last year. He said that pre-financial crisis, banks offered cheap credit, leading to too much liquidity in the market; with the slowdown, they increased their margins sharply and restricted lending to reduce their risks.
And while they reduced lending, liquidity flowed in. Since the slowdown, the UAE Central Bank has cut interest rates, and made additional liquidity facilities available to banks across the country. Most recently, in November last year, after Dubai World’s debt problems were announced, the bank said that it would set up an emergency facility to support banks.