Dubai: President His Highness Shaikh Khalifa Bin Zayed Al Nahyan on Monday approved the law creating a federal credit bureau to assess the credit worthiness of bank clients.
"The credit bureau provides complete transparency on the status of clients and the bank would have a clear vision," Federal National Council (FNC) Speaker Abdul Aziz Al Ghurair told reporters on the sidelines of the Gulf rulers summit in Abu Dhabi.
"This helps banks as well as clients avoid uncertainty," he said.
Al Ghurair, who is also the CEO of Dubai-based Mashreq Bank, said the plan will make the banking system in the UAE more conservative.
Emcredit, the UAE's first credit bureau, welcomed the development.
"We believe it as a major development for the country's financial system as it brings a data backbone to the financial transactions. We were very much part of drafting the federal law on credit bureau and we see it as a major reform," Zaid Kamhawi, Chief Business Officer of Emcredit, told Gulf News.
Borrowing excesses
The global credit crunch exposed the UAE's banking system to borrowing excesses.
The banks have been reporting unprecedented increases in non-performing loans (NPLs) during the past eight to 12 quarters.
Bankers and analysts expect the NPLs to continue to rise during the next two quarters. The surge in bad loans has been largely attributed to the virtual absence of a common data base for banks on credit history of individuals and establishments.
The FNC passed the credit rating bureau bill last year. The approval of the bill by the President is the final step in creating the legal infrastructure for the federal credit bureau.
"This development will improve the legal framework relating to credit data in the country. We are waiting to see its structure. At the moment we are not very clear about what role Emcredit will play in the federal level but I am sure we can significantly contribute to the federal efforts as we have gained significant experience in setting up the first credit bureau in the country," said Kamhawi.
Emcredit is the UAE's pioneer information services company formed in January 2006. It provides enterprise and credit information solutions, offering credit information reports, data verification, data enrichment, decision support analytics and other tools necessary to improve customer acquisition, assessment, servicing, debt collection and portfolio management.
The entity provides a range credit bureau services, cheque-honouring reports, business background reports and other risk assessment tools.
