Banks have not supplied sufficient credit information to Al Etihad Credit Bureau, holding up the launch of a major tool in the UAE’s efforts to strengthen the financial system.
National Bank of Fujairah was yesterday named as the only lender to have provided adequate credit data on its retail customers for the past 24 months, the bureau said yesterday.
The UAE Banks Federation was not immediately available for comment.
The revelation from the Al Etihad Credit Bureau comes just weeks after it said the majority of banks had supplied it with credit information that exceeded international data quality standards.
But a statement released yesterday after a meeting of the bureau’s board of directors stressed the need for all UAE banks to submit customers’ data for the past 24 months, as well as their Emirates ID details.
It said the bureau was ready to start operation once its by-laws had been published in the Official Gazette. However, the ability of the institution to fulfil its mandate of supplying credit reports will be limited without detailed information from banks.
“Despite the continued efforts made by banks to provide their credit data, a large number of them have not yet fully completed the process of providing the past 24 months of credit data,” the bureau said. “The comprehensiveness of the bureau’s credit reports relies upon the banks’ submission of credit data within the stipulated time frame.”
It said National Bank of Fujairah was the only bank to submit “accurate” and “reliable” credit data for that period.
But the claim was challenged by at least one major lender. An Abu Dhabi Islamic Bank spokesperson said the bank had complied with all the requests made to it by Al Etihad Credit Bureau. Other banks were not immediately available to comment.
A person familiar with the matter said the level of data provided by other banks was inconsistent. Some had provided information for the past 12 months only, with others not providing even that level of information.
The board highlighted the need for banks and financial institutions to use Emirates ID in all customer transactions and operations to ensure the bureau’s “record matching process” was 100 per cent accurate.
Officials had set a targeted start date of the first quarter for the bureau to become operational.
The Ministry of Finance, which is overseeing the bureau’s creation, is keen to launch the institution to help to cut the risk of a repeat of a credit crunch similar to 2009. Then a wave of defaults on loans caused banks to pull back on lending, exacerbating a slowdown in the economy.
Concerns have already been raised in recent months about the sustainability of a recent revival in lending and how to curb speculative froth in the property market. Lending growth exceeded 7 per cent last year, according to the Central Bank.
The bureau intends to create a database of the credit history of all retail borrowers to enable banks to build an accurate picture of a potential borrower’s indebtedness, allowing them to assess his or her ability to honour the debt. At the moment, banks cannot check the credit history of customers relating to other lenders.
Experiences from other countries show credit bureaus can help to stop individuals with a poor credit history from amassing further debt, while easing the flow of credit to those able to repay loans. Banks benefit by generally not having to build such large provisions against the risk of defaults.
Since a federal law was passed in 2010 to establish the bureau, moves to establish the institution have stepped up in recent months. The bureau’s chief executive Marwan Lutfi, a former Dubai International Financial Centre official, has overseen a security audit of the system to ensure the efficient roll-out of the bureau’s services, as well as the signing of agreements with all financial institutions, requiring them to submit credit data to the bureau.
That process had appeared to be going smoothly when, at the end of last month, the bureau said 25 banks and other lending institutions – which control about 96 per cent of the retail credit market – are supplying customers’ credit information relating to their payment behaviour for the past 24 months including any defaults.
At the time, Mr Lutfi said the data crossed the bureau’s “credit data accuracy threshold” and “exceeded international data quality standards”.
Yesterday’s release added: “As part of its operational readiness, the bureau has successfully fulfilled all of the requirements for issuing credit reports, including establishing secure links with all financial institutions, and completing internal and external risk assessments.”
At a later stage, the bureau will also assess the creditworthiness of companies.
tarnold@thenational.ae
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