HSBC joins debt settlement fund for UAE nationals

Four banks are poised to sign up to a scheme aimed at helping indebted Emiratis.

HSBC will this month become the second international bank after Standard Chartered to sign up to an initiative aimed at clearing debts owed by UAE nationals. Delores Johnson / The National
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HSBC and three other banks are set to join a scheme aimed at clearing debts owed by UAE nationals through a combination of write-offs and a Dh10 billion (US$2.72bn)government fund.

Their participation comes as the number of Emiratis who have already had their debts settled under the scheme reaches 439, a source at the Central Bank said yesterday.

HSBC will this month become the second international bank after Standard Chartered Bank to sign up to the initiative launched by Sheikh Khalifa, President of the UAE, on National Day last year.

Sharjah Islamic Bank, Noor Islamic Bank and Arab Bank for Investment and Foreign Trade are the other new banks, the source said. They join 13 banks already signed up.

"For some time, Noor Islamic Bank has been in discussion with the Central Bank on how best to alleviate the financial problems faced by indebted UAE nationals," said a spokesman for the bank.

"Although this is not a significant issue for Noor, we support the Central Bank initiative.

"[The programme] is aimed at not only lessening the debt burden of UAE nationals but also heightening awareness about the risks of unchecked borrowing and the benefits of saving for the future."

As part of the initiative, banks agree to write off 50 per cent of the debt owed by Emiratis who qualify under the scheme.

The remaining 50 per cent is then paid back to banks from the Nationals' Defaulted Debts Settlement Fund, overseen by a technical committee made up of representatives of the Central Bank and other government agencies.

To date, 1,300 applications to the initiative have been received. A total of 345 Emiratis have already had their debts settled, with a further 94 in the pipeline.

Emiratis were able to rack up sizeable debts during the global financial crisis as many banks have traditionally been more willing to lend to them, viewing them as less of a non-repayment risk than expatriates.

Existing banks operating under the scheme have reported strong demand from indebted national customers.

"There's definitely a level of interest still," said a staff member at a UAE bank, who asked to remain anonymous.

"We are continuing to get quite a lot of calls from people wanting to register."

Beneficiaries of the fund pay up to 25 per cent of their monthly salary in interest-free, long-term instalments until the clearance sum is repaid to the fund.

In the meantime they will not be able to take out another loan.

Unemployed applicants are required to look for a job and are given six months to find one or face unspecified penalties.

The committee comprises representatives from the Ruler's Court, Abu Dhabi Department of Finance, the Central Bank and the Justice Department in Abu Dhabi and works in coordination with banks and other creditors to negotiate clearance sums for personal debt.

A study by the committee last year compiled a list of 6,830 Emiratis who owed debts of less than Dh1 million.

Of those, 1,300 nationals made applications to seek assistance under the fund.

Some of those included people serving jail sentences for their debts or awaiting legal action.

National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Abu Dhabi Commercial Bank, Union National Bank, National Bank of Ras Al Khaimah, Standard Chartered Bank and Mashreq Bank were among the first banks to sign up to the scheme.

No one was available to comment yesterday from HSBC, Noor Islamic Bank, Sharjah Islamic Bank or the Arab Bank for Investment and Foreign Trade.