UAE banks under fire over Emirati default problem

A senior UAE official has lashed out at banks over the Emirati personal debt default crisis, saying they have taken advantage of lenient financial policies to make more money and accusing them of considering Emiratis as “a source of funds”.

Ahmed Al Zaabi, deputy minister for presidential affairs who heads a newly-created debt settlement committee, said Emirati debtors owe nearly Dh70 billion to the country’s 51 banks and that some of the lenders are over-withdrawing from the debtors’ accounts.

Quoted by the Arabic language daily Emarat Al Youm, he said 332 Emirati defaulters had so far been released from jail and more would be set free soon in line with the UAE President’s instructions to settle their debt.

He accused banks of blackmailing the Emirati personal debtors by insisting that they pay back all the borrowed money at once, adding that they used cheques given by national debtors as a 'sword on their necks' in order to jail them.

“The problem is that banks look at nationals as a source of funds. How could they give cheques to people whose salary is below Dh10,000 a month, this is a big mistake on the part of the banks and we don’t see such behavior in most other countries,” he said.

“Some banks are violating the debt rules…we have asked the central bank to investigate such offences…they are debiting the accounts of Emirati debtors by more than the assigned monthly installment and some of them are exceeding the loan limit set by the central bank according to the debtor’s salary.”

Zaabi asked UAE banks, which control the largest asset base in the Middle East, to cooperate more with the debt settlement committee, adding that President HH Sheikh Khalifa bin Zayed Al Nahyan is giving priority to this issue and wants it to be solved.

“The problem is very big….we believe that banks must now pay back part of the favour offered to them by the UAE…they must respond more positively and favourably to domestic social issues…there is a serious debt problem which is the responsibility of both the debtors and the lenders…there appears to be lack of personal awareness of debt risks amidst the spread of the culture of consumption…but banks have also contributed to this problem by making attractive loan offers to Emiratis in various forms in the absence of tight supervision by the central bank.”

Zaabi said the UAE, the second largest Arab economy and one of the wealthiest nations, understands that banks operate on commercial basis with the aim of making profits and that lending is a key tool for profiting.

“We look at banks as important tools of the domestic economy…but the UAE looks at its citizens as its sons and is responsible for their life and prosperity…the UAE cannot accept that its sons are taken to jail…banks must realize that the UAE has given them many services as it does not tax them and has offered them land and many other big facilities and incentives involving Dh billions,” he said.

“This should prompt these banks to work with the debt settlement committee to return part of the favour it has received from the country…they should not look at this default issue merely from the profit and loss perspective alone.”

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