x Abu Dhabi, UAEFriday 21 July 2017

UAE Central Bank outlines new rules for bad loans

UAE banks have been told to declare bad loans earlier and to make more provisions for them.

The UAE Central Bank in Abu Dhabi has issued new laws over the way UAE banks must handle bad loans.
The UAE Central Bank in Abu Dhabi has issued new laws over the way UAE banks must handle bad loans.

Banks will be required to declare bad loans earlier and book provisions for them sooner, under new Central Bank rules aimed at bringing the country's banking sector into line with international standards.

Lenders will be required to set aside provisions for non-performing loans each quarter instead of waiting until the end of the financial year, under the rules posted on the regulator's website today.

In addition, the regulations also mean banks are likely to declare non-performing loans every three months as well.

Banks will also have to book higher general provisions for unclassified loans and advances.

The requirements would "serve as a catalyst in depicting a truly realistic financial position of banks and other financial institutions," said the Central Bank in a statement.

The Central Bank is seeking to gradually align its regulations with international best practice after the global financial crisis.

Banks' profits were knocked by a rising number of non-performing loans linked to a downturn in the property market and job losses.

 

tarnold@thenational.ae