UAE banks slash loan provisions

August 2007

United Arab Emirates banks have cut the provisions for non-performing loans by nearly 40 per cent, as well as writing off about $3.7 billion.

Banks had set aside $5.25 billion on June 30th 2007 to cover losses from any loan defaults. They had set aside $8.6 billion on March 31st.

Banks may have taken the bad loans off their balance sheets years ago, although the central bank still considered them to be recoverable.
Since the central bank began publishing its data the provision for non-performing loans had not fallen under $8.2 billion.

Speaking to Reuters, a central bank official who did not want to be named said: "The loans were big and very old, more than 20 years."
Sher Consulting president, Andrew Sher told Reuters: "The market was unregulated and a lot of loans went bad. It is prudent to write them off because they are old and non-recoverable."

A change of provisioning policy at the central bank could be reflected in the write-off said Raj Madha, a banking analyst at EFG-Hermes Investment bank in Dubai, speaking to Reuters.

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