Ali Al Nuaimi, the head of the Federal National Council's finance committee, has called on the Central Bank to review the levels of failed cheques in the UAE in order to protect the banking system.
On Monday, The National reported that last year more than 1.5 million cheques, representing Dh55.3 billion (US$15bn) of payments, were returned as invalid when presented for payment.
The figure represents one dud cheque for every 20 used as payment last year.
Mr Al Nuaimi, a banker by trade and an FNC member for Ajman, expressed surprise at the high level of failed cheques.
"If the numbers are correct, there should be some procedure to be made by the Central Bank … to consider and review this phenomenon, and see what is the cause of such a number," he said.
The Central Bank should aim to review the figures and see what solutions could be taken, Mr Al Nuaimi added.
"I'm sure the Central Bank has the capability to come up with solutions. The Central Bank has a duty to ensure the healthiness of the banking system," he said.
He added that he believed the UAE's judicial system was very strong and that the Central Bank had monitoring measures to ensure customers who repeatedly issue failed cheques were cut off from the banking system.
This month, Hussain Al Qemzi, the chief executive of Noor Islamic Bank, said the banking system should seek to develop alternatives to cheques as a method of payment.
Lieutenant General Dahi Khalfan, the chief of Dubai Police, has repeatedly questioned the criminalisation of bouncing cheques for insufficient funds, saying it is a waste of police time to pursue businessmen over missed payments.
Habib Al Mulla, an Emirati lawyer who founded the law firm Habib Al Mulla & Company, has also spoken out against the criminalisation of issuing bad cheques.
The Central Bank does not state how many of the invalid cheque transactions failed because of damage or improper completion, as opposed to those that bounced because of lack of funds.
It is a criminal offence in the UAE to pay using a cheque without sufficient funds to cover the cost.
The UAE operates a four strikes rule for invalid cheques. After a customer has used cheques for four failed transactions, his bank account is closed - effectively prohibiting the bank from recovering the funds.
Banks have, in the past, dangled the threat of a criminal complaint for home owners who have sought to renegotiate mortgage payments.
Some homeowners have fled the country as a consequence, which has forced banks to take possession of properties and resulted in additional costs for mortgage owners who have remained and paid their bills on time.
The cost of pursuing bounced cheques in the courts also loads banks with additional costs, which simultaneously force them to set aside more money to cover missed payments.
The Central Bank did not respond to request for comment.
[ ghunter@thenational.ae ]
