A top banker describes the industry's reaction to the implementation this month of Central Bank rules on retail lending as "anger, denial, then grudging acceptance".
Such has been the concern among banks in the UAE the Central Bank has now set up a retail banking committee, formed to consult regularly with the industry over future regulation.
But the gnashing of teeth among lenders has given way to concern, with some banks saying the new regulations will force the most radical shake-up of the industry in years. The initial effect appears to have been to cause credit growth to stall, with personal loans to residents barely budging between February and March, according to the most recent data from the Central Bank.
One of the key points of contention regarding the Central Bank's circular on retail lending was how it would apply to existing loan books. Having to apply the limits on loan size, now capped at 20 times monthly income, would have created a nightmare for banks with large numbers of retail assets, as much as Dh35 billion (US9.52bn) in the case of First Gulf Bank.
But during the course of negotiations, the regulator relented and allowed existing loans to be "grandfathered" into the rules, meaning only new lending would be bound by the lending limits. "Without that, of course, the industry would have had a huge issue," says Suvo Sarkar, the general manager of consumer and elite banking at the National Bank of Abu Dhabi.
But that meant loans granted before the May 1 deadline for implementing the new retail banking rules could be worryingly large.
There is a great deal of concern among the industry that some banks, particularly smaller lenders looking to grow the size of their loan books in a hurry, "maxed out" in the period before the new rules came into effect, in a "last hurrah" for the easy flowing credit of the old days.
"We would expect that it would be natural by banks to try to maximise on extending loans during the period of the relaxed rules," says Zaid Kamhawi, the chief business officer of Emcredit. Central Bank statistics for lending last month are not yet available. "However, we believe that the biggest winners would be banks that immediately start adopting and working with the new rules instead of finding ways to circumvent them."
Banking chiefs are concerned customers may also be able to circumvent the new regulations by concealing debts. In the absence of a federal credit bureau, banks have limited means to check that customers' total repayments do not exceed the new limit of 50 per cent of monthly income. "The effectiveness of the Central Bank regulations could be greatly enhanced if banks have access to accurate information about the borrower's past payment behaviour which is the strongest indicator of a borrower's future willingness to repay," Mr Kamhawi says, adding that a credit bureau with oversight of the entire industry would be best placed to provide such data.
"The only and most accurate way to determine the total debt exposure of a borrower, and therefore determine his debt burden ratio, is by accessing comprehensive credit information reports that reflect total liabilities extended to that borrower by all banks," he says.
The new regulations also allow for greater lending to expatriates than had been allowed under the previous limit of Dh250,000, set in 1993.
With all personal lending now capped at 20 times an individual's total monthly income, the amount of credit that can be granted could increase for many expatriates, who are traditionally perceived as more risky than lending to Emiratis because of the transitory nature of the workforce. To counteract the revenue hit from the Central Bank's regulations, cross-selling of products has become more important for banks to maintain revenues since the size of loans has been capped. As separate Central Bank regulations have prohibited banks from cold-calling members of the public with new offers, a number of banks have instead targeted their existing customers with increased numbers of telemarketing calls - permissible under the new rules.
Some bankers question the wisdom of this strategy. To avoid irritating customers and driving them into the arms of rival banks, cross-selling must become better targeted and more intelligent, says Sanjoy Sen, the regional head of retail banking at Citibank.
"It's not about dumping new products on customers," he says. "What we believe is that the cross-sell has to be based on customer need." The bank is touting a suite of analytic tools to make sense of consumer spending patterns and help predict when a customer needs a specific product. "It may be a loan, it may be a top-up [of a pre-paid card]. Based on behavioural patterns and scoring of customers, we offer them new products." Bankers stressed neglected customer service standards in the UAE would have to improve as lenders competed for customers who did most of their banking with one lender.
"We need to build a sustainable core of primary relationships [with customers]," says Douglas Beckett, the head of retail banking at Mashreq. "As an industry, we haven't done a great job."
That sense of customer service had been lost during the Emirates' decade-long property bubble, some bankers say. "In that sense, the crisis, in a perverse way, has helped to improve service," said banker who asked to remain anonymous.
ghunter@thenational.ae
How to avoid crypto fraud
- Use unique usernames and passwords while enabling multi-factor authentication.
- Use an offline private key, a physical device that requires manual activation, whenever you access your wallet.
- Avoid suspicious social media ads promoting fraudulent schemes.
- Only invest in crypto projects that you fully understand.
- Critically assess whether a project’s promises or returns seem too good to be true.
- Only use reputable platforms that have a track record of strong regulatory compliance.
- Store funds in hardware wallets as opposed to online exchanges.
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
The five types of long-term residential visas
Obed Suhail of ServiceMarket, an online home services marketplace, outlines the five types of long-term residential visas:
Investors:
A 10-year residency visa can be obtained by investors who invest Dh10 million, out of which 60 per cent should not be in real estate. It can be a public investment through a deposit or in a business. Those who invest Dh5 million or more in property are eligible for a five-year residency visa. The invested amount should be completely owned by the investors, not loaned, and retained for at least three years.
Entrepreneurs:
A five-year multiple entry visa is available to entrepreneurs with a previous project worth Dh0.5m or those with the approval of an accredited business incubator in the UAE.
Specialists
Expats with specialised talents, including doctors, specialists, scientists, inventors, and creative individuals working in the field of culture and art are eligible for a 10-year visa, given that they have a valid employment contract in one of these fields in the country.
Outstanding students:
A five-year visa will be granted to outstanding students who have a grade of 95 per cent or higher in a secondary school, or those who graduate with a GPA of 3.75 from a university.
Retirees:
Expats who are at least 55 years old can obtain a five-year retirement visa if they invest Dh2m in property, have savings of Dh1m or more, or have a monthly income of at least Dh20,000.
Earth under attack: Cosmic impacts throughout history
- 4.5 billion years ago: Mars-sized object smashes into the newly-formed Earth, creating debris that coalesces to form the Moon
- 66 million years ago: 10km-wide asteroid crashes into the Gulf of Mexico, wiping out over 70 per cent of living species – including the dinosaurs.
- 50,000 years ago: 50m-wide iron meteor crashes in Arizona with the violence of 10 megatonne hydrogen bomb, creating the famous 1.2km-wide Barringer Crater
- 1490: Meteor storm over Shansi Province, north-east China when large stones “fell like rain”, reportedly leading to thousands of deaths.
- 1908: 100-metre meteor from the Taurid Complex explodes near the Tunguska river in Siberia with the force of 1,000 Hiroshima-type bombs, devastating 2,000 square kilometres of forest.
- 1998: Comet Shoemaker-Levy 9 breaks apart and crashes into Jupiter in series of impacts that would have annihilated life on Earth.
-2013: 10,000-tonne meteor burns up over the southern Urals region of Russia, releasing a pressure blast and flash that left over 1600 people injured.
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Mohammed bin Zayed Majlis
History's medical milestones
1799 - First small pox vaccine administered
1846 - First public demonstration of anaesthesia in surgery
1861 - Louis Pasteur published his germ theory which proved that bacteria caused diseases
1895 - Discovery of x-rays
1923 - Heart valve surgery performed successfully for first time
1928 - Alexander Fleming discovers penicillin
1953 - Structure of DNA discovered
1952 - First organ transplant - a kidney - takes place
1954 - Clinical trials of birth control pill
1979 - MRI, or magnetic resonance imaging, scanned used to diagnose illness and injury.
1998 - The first adult live-donor liver transplant is carried out
Emergency
Director: Kangana Ranaut
Stars: Kangana Ranaut, Anupam Kher, Shreyas Talpade, Milind Soman, Mahima Chaudhry
Rating: 2/5
More coverage from the Future Forum
How to apply for a drone permit
- Individuals must register on UAE Drone app or website using their UAE Pass
- Add all their personal details, including name, nationality, passport number, Emiratis ID, email and phone number
- Upload the training certificate from a centre accredited by the GCAA
- Submit their request
What are the regulations?
- Fly it within visual line of sight
- Never over populated areas
- Ensure maximum flying height of 400 feet (122 metres) above ground level is not crossed
- Users must avoid flying over restricted areas listed on the UAE Drone app
- Only fly the drone during the day, and never at night
- Should have a live feed of the drone flight
- Drones must weigh 5 kg or less
Race card
4pm Al Bastakiya Listed US$300,000 (Dirt) 1,900m
4.35pm Mahab Al Shimaal Group 3 $350,000 (D) 1,200m
5.10pm Nad Al Sheba Turf Group 3 $350,000 (Turf) 1,200m
5.45pm Burj Nahaar Group 3 $350,000 (D) 1,600m
6.20pm Jebel Hatta Group 1 $400,000 (T) 1,800m
6.55pm Al Maktoum Challenge Round-3 Group 1 $600,000 (D) 2,000m
7.30pm Dubai City Of Gold Group 2 $350,000 (T) 2,410m
The National selections:
4pm Zabardast
4.35pm Ibn Malik
5.10pm Space Blues
5.45pm Kimbear
6.20pm Barney Roy
6.55pm Matterhorn
7.30pm Defoe
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
THE SPECS – Honda CR-V Touring AWD
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Five famous companies founded by teens
There are numerous success stories of teen businesses that were created in college dorm rooms and other modest circumstances. Below are some of the most recognisable names in the industry:
- Facebook: Mark Zuckerberg and his friends started Facebook when he was a 19-year-old Harvard undergraduate.
- Dell: When Michael Dell was an undergraduate student at Texas University in 1984, he started upgrading computers for profit. He starting working full-time on his business when he was 19. Eventually, his company became the Dell Computer Corporation and then Dell Inc.
- Subway: Fred DeLuca opened the first Subway restaurant when he was 17. In 1965, Mr DeLuca needed extra money for college, so he decided to open his own business. Peter Buck, a family friend, lent him $1,000 and together, they opened Pete’s Super Submarines. A few years later, the company was rebranded and called Subway.
- Mashable: In 2005, Pete Cashmore created Mashable in Scotland when he was a teenager. The site was then a technology blog. Over the next few decades, Mr Cashmore has turned Mashable into a global media company.
- Oculus VR: Palmer Luckey founded Oculus VR in June 2012, when he was 19. In August that year, Oculus launched its Kickstarter campaign and raised more than $1 million in three days. Facebook bought Oculus for $2 billion two years later.
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
SERIES SCHEDULE
First Test, Galle International Stadium
July 26-30
Second Test, Sinhalese Sports Club Ground
August 3-7
Third Test, Pallekele International Stadium
August 12-16
First ODI, Rangiri Dambulla Stadium
August 20
Second ODI, Pallekele International Stadium
August 24
Third ODI, Pallekele International Stadium
August 27
Fourth ODI, R Premadasa Stadium
August 31
Fifth ODI, R Premadasa Stadium
September 3
T20, R Premadasa Stadium
September 6
The specs
Engine: 3-litre twin-turbo V6
Power: 400hp
Torque: 475Nm
Transmission: 9-speed automatic
Price: From Dh215,900
On sale: Now