Dubai: The UAE Central Bank will soon introduce a set of regulations governing the fees and commissions charged by banks, Sultan Nasser Al Suwaidi, the Central Bank Governor, said in Dubai.
Speaking at the inauguration of the Bankers' Business Group late on Tuesday, Al Suwaidi observed that there has been a big surge in the number and size of fees and commissions charged by banks in the country and some of these are not acceptable.
"I would agree that the banks have increased fees and commissions substantially. We are aware that there are different types of fees and charges imposed on customers. We have been receiving a number of complaints about rising fees and commissions for banking services," said Al Suwaidi.
The Central Bank governor yesterday urged banks to rationalise these fees or face imminent intervention. "We will intervene if we continue to receive such complaints. We will soon introduce a new set of regulations," he said.
Reduced activities
Banks operating in the UAE that reduced lending activities following the global financial crisis have increased fees, service charges and commissions to partly offset the reduced interest income.
In many cases banks have more than doubled fees on services such as issuance of liability letters, non-liability letters, loan processing fees, cheque return fees and late payment fees on credit cards, to name a few.
The Central Bank governor acknowledged that the lending rates in the country are above ideal levels and banks are still reluctant to lend.
"We have high costs of borrowing in the country and we all should know how we arrived at this. It has got a lot to do with the past credit assessment practices that priced credit at much lower rates than the risk they carried," he said.
Over the past two years UAE banks have been going through balance sheet repairs through high provisions and absorbing the impairment costs that adversely affected their risk appetite and lending capacity.
"Banks are not willing to lend at low rates anymore because they see the interest rates they charge are not adequate enough to cover the risk," Al Suwaidi said.
The governor insisted that the UAE's banking sector is not facing a liquidity shortage. "The current high borrowing costs are not linked to the availability of funds but have a lot to do with the risk perception of banks.
Costs
"The Central Bank can't compel banks to lend at lower rates, but we would like to see banks improve their lending activities at reduced costs," the Central Bank governor said.
The governor called on the Bankers Business Group to create a code of conduct for bankers to avoid any conflict of interests affecting the integrity of the banking system.
He said the Central Bank has taken adequate steps to set up the federal credit bureau by creating a central data base that will collect and distribute data on all banking transactions in the country.
"The systems are ready. Now it is for the committee under the Ministry of Finance to move ahead with the implementation of the credit bureau," Al Suwaidi said.
