The Federal National Council (FNC) has postponed discussions of a draft resolution for the establishment of the Emirates Bank of Development (EBD) to its next term, which is expected to begin after four months.

"There are disagreements on seven sections of the draft resolution," said Abdul Aziz Al Ghurair, President of FNC, after the debate that lasted for hours.

"Such a bank's scope of operations would be very wide and loose, needing huge capital. Plus, the UAE State Audit Institution (UAEAI) has no supervision on the proposed bank and there is no legal mechanism for the transfer of staff of the UAE Real Estate Bank and Emirates Industrial Bank to the new bank that has emerged from their merger," he said.

"The draft resolution still needs a deep study and it has been postponed for the next term upon the request of 19 FNC members out of 31."

FNC members expressed their fears that the new bank would compete with others, in addition to allocating most of its loans for real estate investment rather than industrialisation.

The members also called for the new bank to be Shariah compliant.

Obaid Humaid Al Tayer, Minister of Financial Affairs, said the EBD would not be a competitor to other commercial banks in the country, since the new bank would not be for profit.

"The EBD's objectives will be developmental and it will not waste the government's money in useless real estate projects. The government has a strong vision for the new bank to have a big role in financing small and mid-sized enterprises for UAE nationals, especially since commercial bank in the country do not care about financing such projects," said Al Tayer.

"We hope such a bank can be a strong entity, such as the Asian Development Bank," he added

Al Tayer said the bank would follow Shariah principles and would offer credit, grant loans and open new personal accounts for clients.

"The merger of the UAE Real Estate Bank and the Emirates Industrial Bank with a suggested capital exceeding Dh10 billion, was a correct decision that goes in parallel with the government's strategic plans for building a strong industrial base," said Al Tayer. "The merger came after a feasibility study conducted by a specialised outfit." The bank would introduce financial facilities for UAE nationals to build and expand their residences, added Al Tayer.

"The new bank will have branches across the country and will focus on quality rather than quantity. It will not have a large number of staff, but a small one specialised in the finance of industry and small and mid-size enterprises," he said.

"The bank may open branches outside the country if the nature of its work demands it. It would receive loans from the government to finance developmental projects and would be able to invest and re-invest in any properties, entitlements or bonds that may be corporeal, incorporeal or a mix of both, such as stocks, shares, securities, financial and commercial bonds, foreign currencies, metals, commodities, etc.," he said.

The draft resolution has outlined several specialties of the bank; mainly the financing of industrial projects, easing real estate credit that for the construction, maintenance and development of personal residential units, in addition to professional, agricultural and co-operative projects that offer benefits to the public on behalf of the UAE Government.

The FNC meeting saw council members express a variety of reservations about the proposed bank, but Al Tayer said: "There is no intention for the bank to go for IPO anytime soon. Going for a listing will need the passing of an appropriate period of time from its inception.

"The EBD is a significant step forward. The government will pay the difference between the capitals of the real estate bank and the industrial bank in order for the paid up capital to reach Dh5bn," said Al Tayer.

 

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