Abu Dhabi: The Emirates Banks Association met on Sunday to discuss the central bank's recent tough new limits imposed on real estate mortgages for both expatriates and nationals in the UAE. The bankers have requested that the UAE Central Bank postpone implementation of the mortgage cap for a month.
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“The majority of the banks operating in the country attended the meeting which was held in Dubai and submitted a request to the Central Bank to postpone the implementation of the mortgage cap ratios to the real estate sector by a month in order to pave the way for further suggestions and proposals about these ratios to be discussed with the Central Bank later on,” said a well informed banking source, who attended the meeting and declined to be named.
During this grace period the bankers would develop guidelines that would be the basis of a code of conduct. This proposed alternative self-managing code would help the sector buffer the formation of overheated markets based on speculation. The memo is expected to be delivered to the Central Bank, which has not officially commented yet on this.
“The proposed code of conduct aims to assist the banks and the financial firms in order to avoid any excesses in regulations or the so-called over-regulation by the Central Bank,” said a financial expert who declined to be named as the topic is sensitive.
Abdul Aziz Al Gurair, CEO of Mashreq Bank and chairman of the Dubai International Financial Authority and head of the Emirates Banks Association, said earlier: “Banks are concerned the central bank is imposing many regulations,” warning that “if this approach proceeds, heavy regulations would be imposed.”
He advised that there is a need to have balanced regulation to boost the economy. Suggesting alternatives to the Central Bank's “heavy-handed” solution, Waddah Taha, chief analyst and economist at the Zarouni Group, commented that “Some of the banks would suggest a ratio of 75 per cent to be financed through loans for both expatriates and Emiratis, provided that the premiums do not exceed 50 per cent of his salary.”
He added that amongst the suggestion would be financing 50 per cent of the properties of non-residents, depending on the Emirate itself, the property location and its market value.”
Agreeing, Hammam Shamma, economist and analyst at Al Fajr Securities, said that the UAE has had the lowest loan growth among the six-nation GCC (Gulf Cooperation Council) nations in 2012.
“When the UAE Central Bank issues rules to limit and cap lending, this had only led loans and advances to grow only by 2.7 per cent by end of August 2012 on average, with zero growth in September and October for the same year, lower from 3 per cent in 2011,” said Shamma.
Taha further commented that the code of conduct (or code of ethics) has to be abided by banks and financial institutions.
“The banks and the financial firms should be committed to the code as this has to deal with the country's economic security. We don't want to repeat 2008 in 2013. Our economy is recovering and this requires seeking serious investors in the beginning to avoid the bubble and to eliminate flipping,” said Taha.