UAE Central Bank may be allowed to issue fines on lenders
For the first time, the UAE Central Bank is set to be granted the power to impose fines on banks operating in the country. The planned change is part of revisions to the country’s banking laws, which are under discussion.
Two sources with knowledge of the situation told The National that a revised version of the Central Bank Law, passed in its original form in 1980, will contain a provisions enabling the Central Bank to levy financial penalties on banks operating in the country.
Neither source gave any detail about the circumstances in which the Central Bank could levy fines, nor the size of the fines.
The new law is under discussion by the Central Bank’s board of directors. While one of the sources said the changes would come into force next year, the second source said that the law was still at an early stage of discussion and was highly unlikely to be finalised next year.
The Central Bank did not respond to several requests for comment.
The discussion of the powers to impose such penalties comes as the Central Bank fields complaints from small and medium-enterprise (SME) customers of Standard Chartered, which has given thousands of account holders one month’s notice or less to close their accounts and make other arrangements.
While some small-business customers have logged complaints with the Central Bank about StanChart’s account closure programme, most have given up on taking legal action against the bank.
StanChart has been closing thousands of SME accounts in the UAE following pressure from US regulatory authorities and stiffening competition with local banks.
A senior Dubai-based banking lawyer told The National that small businesses could mount a case against StanChart even though the 30 days’ notice it granted account holders is consistent with the bank’s account terms.
“Even if it’s written in their agreements at the time of the account opening, it can be considered abusive to ask someone to close the account within one month. It’s not enough time,” said the lawyer, who asked to remain anonymous.
A number of StanChart customers told The National that they had received letters giving them 30 days’ notice several days late, giving them less than four weeks’ notice of their account closures.
“They would have issued cheques from the accounts,” the lawyer said. “Of course there are extreme cases, but to tell a whole category of clients and tell them you’re cancelling their accounts ... it should have been done more amicably.”
While some of the bank’s account holders have spoken of their desire to pursue legal action, many are resigned to their fate, given the time and costs involved.
“Our focus at the moment is to get new accounts up, to maintain our cash flow, to fulfil our commitment to our team, and to ensure we have a vehicle for our clients to pay us,” said one Dubai-based account holder.
“Having experienced the legal framework of the UAE, I am not in a position to undertake a long and costly battle that will ultimately not resolve my immediate issue.”
A second Dubai-based account holder said that he raised the subject of legal action against StanChart with several large law firms, but was advised that they were unable to take the case given existing legal relationships with the bank.
Follow The National’s Business section on Twitter
Published: November 1, 2014 04:00 AM