What a credit bureau means to banks and customers

DUBAI: The launch of credit bureau is expected to allow banks in the country to check a customer’s financial health before extending new debt by accessing a detailed electronic database shared by all financial service providers.

The credit bureau is expected to bring the much needed transparency in the UAE’s banking system that will protect banks from any abnormal increase non-performing loans and customers from excessive debt burden.

Until now, banks in the UAE have often been unable to access data on consumers at other financial institutions when making lending decisions. Borrowers could obtain loans, credit cards and mortgages from multiple lenders and run up debts they sometimes could not repay.

The sharp decline in property prices and values of other asset classes that followed the financial crisis saw bad debts of many banks in the country surging in double digits. The launch of credit bureau is expected to protect the banking system and the economy from potential debt bubbles.

Many bankers who spoke to Gulf News said the impact of an increase in default is not likely to be very big as most banks have gone through a period of deleveraging and balance sheet process over the last 4 to 5 year and have been cautious in risk assessment.