UAE banks prepare new debt transfer controls for borrowers from January 2027

Abu Dhabi: The banking sector is moving towards introducing new controls to regulate the transfer of customer debts between banks, potentially from 1 January 2027. Under the anticipated measures, borrowers would be required to remain with the bank that provided their financing for a specified period and pay a certain number of instalments before being allowed to transfer their debt to another bank. The move is intended to regulate customer transfers and reduce frequent switching between banks to take advantage of financing offers, according to a banking source who preferred not to be named. The source said the anticipated regulations, if adopted, would establish a clearer framework specifying how long borrowers must remain with their original bank before applying for a debt transfer. This would limit customers moving their financing shortly after obtaining it and provide greater stability in financing relationships between banks and their customers. The source said: “These measures are expected to contribute to reducing practices that may lead to repeated closures and re-granting of loans within short periods of time, and the associated administrative procedures and financing costs, in addition to enhancing the ability of banks to plan loan portfolios and manage the risks associated with them.” According to the source, the new regulations would take into account different types of financing and borrowers’ circumstances. They are also expected to clarify how the waiting period will be calculated, the number of instalments that must be paid and any potential exceptions, as well as defining whether the requirements apply to personal financing and other banking obligations. Transparency is particularly important as some banks offer debt-transfer deals that include deferred instalments. Grace periods, depending on the terms of the contract, may increase the total cost of financing or extend the repayment period, making it important for borrowers to compare their total obligations before deciding to move their debt. Final details of the regulations, including the waiting period, the required number of instalments and the implementation date, remain subject to the official announcement of the regulatory instructions. These are expected to clarify the implementation mechanisms and their impact on the banking finance market. Since relevant departments at banks were informed of the anticipated measures, the local market has seen increased competition among banks seeking to attract customers through offers to transfer existing loans and financing. These include lower interest rates or profit margins, the restructuring of monthly obligations and grace periods that defer the start of instalment payments. According to the source, these grace periods range from seven to 12 months for UAE citizens and six to nine months for residents. Key point The anticipated regulations would take into account different types of financing, borrowers’ circumstances and potential exceptions, while also defining whether they apply to personal financing and other banking obligations.