GO
Loading...

UPDATE 2-UAE c.bank to discuss exposure rules with banks

(Recasts with comments by central bank governor)

KUWAIT, Oct 1 (Reuters) - The United Arab Emirates central bank will discuss with commercial banks their compliance with a deadline for them to limit their exposure to state-linked debt, central bank officials said on Monday.

Under new rules, announced in early April with a Sept. 30 deadline, any bank's lending to the governments of the seven-member UAE federation and related entities is capped at 100 percent of its capital base, while lending to a single borrower is curbed at 25 percent. Previously, there was no limit.

But many of the largest UAE banks are believed to have been well over the new limits when the deadline passed on Sunday.

Asked by reporters about this on Monday, UAE central bank governor Sultan Nasser al-Suweidi said: "This is a matter that we continuously discuss with banks.

"And of course not all banks will be able to comply with the new regulation at the same time," Suweidi said on the sidelines of an Arab central bankers' conference in Kuwait.

Asked whether UAE banks could easily shrink their portfolios of loans to the state at a time when European banks were hit by the euro zone debt crisis and unable to buy them, Suweidi said: "There's always going to be a system for dealing with everything." He did not elaborate.

Earlier, Saif Hadef Al Shamsi, assistant governor for monetary policy and financial stability at the UAE central bank, told reporters when asked about the deadline: "There is no extension. It stands as it is."

But he added that the central bank would deal on an individual, case-by-case basis with commercial banks on the issue of the deadline.

The new rules aim to prevent any repeat of Dubai's corporate debt crisis, which erupted in 2009 as the real estate market crashed. The crisis was worsened by local banks' excessive exposure to government-related entities (GREs).

But an April research note by Deutsche Bank estimated the exposures of Emirates NBD and National Bank of Abu Dhabi were at 192 and 199 percent of capital respectively; Abu Dhabi Commercial Bank stood at 108 percent. Since April, a large amount of loan assets has not been offered for sale on the secondary market, bankers say.

Since it could be damaging to the banks and the economy if they tried to sell off their loans to GREs quickly, many commercial bankers do not expect the rules to be applied strictly, and they do not think formal sanctions will be levied against lenders which missed the deadline.

(Reporting by Martin Dokoupil; Editing by Amran Abocar and Andrew Torchia)

((andrew.torchia@thomsonreuters.com)(+9715 6681 7277)(Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))

Keywords: EMIRATES CENTRALBANK/LOANS