June 9, 2012 / 12:21 PM / 6 years ago

UAE may fine banks for bad loans - paper

DUBAI, June 9 (Reuters) - The United Arab Emirates may soon fine banks which grant loans to consumers who are unable to pay back the debt, the central bank governor was quoted as saying in remarks published on Saturday.

The UAE is working on a law to protect consumers’ rights, which would include “fines for banks that lend to borrowers who cannot afford to repay”, The National newspaper quoted Sultan Nasser al-Suweidi as saying.

The governor was speaking at a meeting last month of the Federal National Council, an elected body which advises the government, the paper said. He did not give further details.

The UAE is still recovering from its 2009-2010 corporate debt crisis. Banks’ provisions against bad loans rose 25 percent from a year earlier to 55.3 billion dirhams ($15.1 billion) last December, central bank data show.

In April, the central bank expanded its large-exposure limit rules for commercial banks, introducing new caps for loans made to local governments and their entities in the first such change in nearly two decades.

In addition to preventing banks from putting themselves at risk, authorities want to restrain excessive lending in order to improve the welfare of middle- and lower-income citizens. Last month, state news agency WAM said the government would pay off up to 5 million dirhams of defaulted loans for each indebted Emirati. (Writing by Rania El Gamal; Editing by Andrew Torchia)

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