UAE Banks Federation to seek penalties for banks that break mortgage rules
Employees could be slapped with lifetime ban as bank body recommends stiff action
Dubai: The UAE Banks Federation (UBF), the representative body of banks operating in the country will recommend penalties for banks and bank employees found flouting the recently announced mortgage rules, senior bankers said.
The UBF recently adopted a code of conduct for all its members. While code aims to raise the professional standards and to promote greater trust in the UAE banking industry, the move to impose penalties on erring banks will be the first in a series of measures planned to bring about discipline and a new banking culture in the UAE.
“UAE Banks Federation will work closely with the Central Bank of UAE to make sure that all banks adhere to the recently announced mortgage rules. We will soon recommend a set of penalties for banks and bank employees who violate these rules,” said Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation and CEO of Mashreq.
Al Ghurair said the UBF is happy with the central bank rules on mortgages and it is broadly in line with its recommendations. “All provisions in the regulation defining the eligibility of various categories of borrowers based on the loan-to-value (LTV) ratio were based on our recommendations. The only change was in the case of LTVs of properties that are valued at more than Dh5 million,” he said.
Under the new rules, for UAE nationals buying properties valued at Dh5 million and below the LTV will be 80 per cent and for properties that exceed Dh5 million in value, bank financing shall not exceed 70 per cent. In the case of expatriates, the LTVs are set at 75 per cent and 65 per cent respectively, in these two categories.
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“As the new rules are introduced in consultation with UBF, banks have the responsibility to implement it. We will seek penalties including suspension of banks from offering these products, if found violating the rules. If any bank employee is found misrepresenting the banks on these regulations, the penalties could range from suspension to prohibiting such employees from working in the UAE’s banking sector,” said Andre Sayegh, CEO of First Gulf Bank.
UBF welcomed the recent central bank rules on mortgages and banks’ exposure to government related entities (GREs). “The new mortgage rules are good for all stakeholders in the markets such as property investors, developers and banks. This will eliminate flippers and strengthen market confidence,” said Al Ghurair. However, he added that the LTVs should be dynamic and flexible enough to suit the market conditions.
The UBF welcomed the central bank move to give a five-year time frame to UAE banks to reduce their excess balance sheet exposure to GREs. The banks are now allowed to reduce excess lending to state entities by 20 per cent per annum until they reach the exposure ceiling set by the central bank. “It is a fair move. While it gives more time for banks to realign their balance sheets, it gives time to GREs to seek alternative funding sources,” said Al Ghurair.
