UAE banks face deadline for Saad & Algosaibi exposure

The Central Bank of UAE has told banks to allocate provisions of 80 per cent of their exposure to the collapsed Saudi family business conglomerates Saad and Algosaibi by the end of 2010, press reports said on Monday.

In a circular to the country’s 23 national banks and 28 foreign units, central bank governor Sultan Al Suwaidi said central bank’s approval of the banks’ audited results for 2010 would be conditional on those provisions.

“All banks and financing companies must increase their provisions against their credit facilities to Saad and Algosibai to 80 per cent of those facilities,” said the circular, carried by the Arabic language daily Alkhaleej.

It repeated previous instructions that the banks must also set aside provisions of 100 per cent against their exposure to the Bahrain-based Awal Bank and the International Banking Corporation, two faltering institutions owned by the two Saudi family businesses whose debt problem has hit scores of banks.

“All these provisions must be allocated by the end of 2010 and the central bank’s approval of the banks’ annual audited results are conditional on the allocation of those provisions,” Suwaidi said in the circular.

UAE banks have already chopped massive funds off their financial resources to build up loan loss provisions following the 2008 global fiscal crisis, the Saad and Algosaibi default problem and Dubai World debt issue.

Since the end of 2008, their combined non-performing loan provisions have soared by Dh19.9 billion to reach Dh39.6 billion at the end of October 2010, according to the central bank.
 

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