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UAE plans more credit regulations
Rules needed to ensure faster credit growth at slow times; Economic growth of 3-4 pct reasonable at present.
October 13, 2010 4:13 by Reuters
The United Arab Emirates intends to issue new rules to control credit growth, the Gulf oil producer’s central bank governor said on Wednesday.
The OPEC member’s economy took a sharp hit in 2008 when the global credit crunch popped a real estate bubble sustained by a six-year oil price boom, prompting a slump in lending.
“We believe we should issue new regulations to slow down the credit portfolio growth when it reaches a certain rate so we have a space to grow at higher rates at slow times,” Sultan Nasser al-Suweidi told a financial conference in Dubai.
“We are going to come up with new regulations to regulate credit extension, for example, (for) mortgage loans,” Suweidi said. “You will see new regulations coming which will make it easy for individuals to have a sound financial position.”
Suweidi said that in the run-up to the crisis, UAE banks’ credit portfolios were growing at rates upwards from 34 percent a year, adding that some new rules for credit were in the pipeline.
“We believe it is wrong to grow banks’ credit portfolios at the high percentages we’ve seen from 2005 to 2008, and at the same time it is equally wrong to slow down to the present time rate of growth,” he said.
In June this year, claims on the private sector fell 3.2 percent year-on-year, after having risen 14.6 percent in June 2009, according to central bank data.
The central bank governor also said economic growth at a rate of 3 to 4 percent in the United Arab Emirates would be reasonable under the current circumstances of the global economy.
The UAE economy ministry sees GDP growth of 2.0 to 3.2 percent in 2010 based on oil price projections of $75 to $85 a barrel.
In a Reuters poll last month, analysts raised their forecasts for UAE economic growth this year to 2.4 percent, from 2.1 percent in a poll in June after state-owned Dubai World sealed a $24.9 billion deal with most of its creditors, easing concerns about continued fallout from Dubai’s debt crisis.
Suweidi also said he saw “uncalculated risks” in the Gulf monetary union project, which the UAE pulled out of last year after losing its bid to host the joint central bank to Saudi Arabia, three years after Oman also withdrew.
The project, designed to emulate the euro zone, has been delayed by political disagreements in the region that is dominated by the Saudi kingdom, the world’s largest oil exporter. Remaining states pursuing the union include Kuwait, Qatar and Bahrain.
(Reporting by Mahmoud Habboush, Martina Fuchs and Martin Dokoupil; writing by Raissa Kasolowsky; editing by Stephen Nisbet)