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Central Bank stands firm on lending limits
Gregor Stuart Hunter
Oct 1, 2012
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The Central Bank is standing its ground against a backlash from commercial lenders over new exposure limits, saying the rules will not change.
Related
■ Gulf banks shifting lending focus to government-linked companies
■ Central Bank regulations prove to be thorny issue
Topic Central Bank of the UAE Emirates NBD NBAD Finance
Regulations came into effect on Sunday, limiting the amount banks could lend to governments and their commercial holding companies.
Lenders including Emirates NBD and National Bank of Abu Dhabi have said they were in breach of the new limits and were not sure how to reduce their exposures.
Despite expectations that the Central Bank would grant waivers or extensions to banks, the regulator is refusing to budge on the policy.
"There is no extension. It stands as it is," Saif Hadef Al Shamsi, the assistant governor for monetary policy and financial stability, said on the sidelines of an Arab central bankers' conference in Kuwait.
"This is a matter that we continuously discuss with banks … and, of course, not all banks will be able to comply with the new regulation at the same time," said the Central Bank governor Sultan Nasser Al Suwaidi when asked about banks that were in breach of the limits.
The loan limits, announced in April and in effect from Sunday, forbid bank lending to local governments if exposure exceeds a lender's total capital. They also prohibit exposure to governments' commercial entities in aggregate from crossing the same limit. No limits previously existed.
Bankers have speculated it could take years to reduce their government loan books, with few European banks having the capital to take the debts off local banks' books.
Emirates NBD is having "constructive discussions with the Central Bank on a one-to-one basis", a spokesman for the bank said.
National Bank of Abu Dhabi said last week it had asked the Central Bank for an extension to Sunday's deadline "to give time for detailed and technical discussions to take place".
The regulator's stance surprised analysts, some of whom had expected a six-month extension to the deadline.
However, it is unlikely the Central Bank will attempt to enforce the regulations and punish breaches of the rules immediately, said Jean-Michel Saliba, an economist at Bank of America Merrill Lynch.
Still, the regulations could serve as a "tool to force dialogue whenever [banks] want to increase exposure to specific names", he said.
"They'll still keep discussing it with the banks to see how this can turn into some kind of macro-prudential rule."
http://www.thenational.ae/thenationalconversation/industry-insights/finance/central-bank-stands-firm-on-lending-limits
Gregor Stuart Hunter
Oct 1, 2012
Save this article
The Central Bank is standing its ground against a backlash from commercial lenders over new exposure limits, saying the rules will not change.
Related
■ Gulf banks shifting lending focus to government-linked companies
■ Central Bank regulations prove to be thorny issue
Topic Central Bank of the UAE Emirates NBD NBAD Finance
Regulations came into effect on Sunday, limiting the amount banks could lend to governments and their commercial holding companies.
Lenders including Emirates NBD and National Bank of Abu Dhabi have said they were in breach of the new limits and were not sure how to reduce their exposures.
Despite expectations that the Central Bank would grant waivers or extensions to banks, the regulator is refusing to budge on the policy.
"There is no extension. It stands as it is," Saif Hadef Al Shamsi, the assistant governor for monetary policy and financial stability, said on the sidelines of an Arab central bankers' conference in Kuwait.
"This is a matter that we continuously discuss with banks … and, of course, not all banks will be able to comply with the new regulation at the same time," said the Central Bank governor Sultan Nasser Al Suwaidi when asked about banks that were in breach of the limits.
The loan limits, announced in April and in effect from Sunday, forbid bank lending to local governments if exposure exceeds a lender's total capital. They also prohibit exposure to governments' commercial entities in aggregate from crossing the same limit. No limits previously existed.
Bankers have speculated it could take years to reduce their government loan books, with few European banks having the capital to take the debts off local banks' books.
Emirates NBD is having "constructive discussions with the Central Bank on a one-to-one basis", a spokesman for the bank said.
National Bank of Abu Dhabi said last week it had asked the Central Bank for an extension to Sunday's deadline "to give time for detailed and technical discussions to take place".
The regulator's stance surprised analysts, some of whom had expected a six-month extension to the deadline.
However, it is unlikely the Central Bank will attempt to enforce the regulations and punish breaches of the rules immediately, said Jean-Michel Saliba, an economist at Bank of America Merrill Lynch.
Still, the regulations could serve as a "tool to force dialogue whenever [banks] want to increase exposure to specific names", he said.
"They'll still keep discussing it with the banks to see how this can turn into some kind of macro-prudential rule."
http://www.thenational.ae/thenationalconversation/industry-insights/finance/central-bank-stands-firm-on-lending-limits
