National Bank of Abu Dhabi PJSC said it’s in talks with the United Arab Emirates central bank to exclude its portfolio of “high-quality” bonds from a cap on lending to governments and state-linked companies.
The U.A.E. second-biggest bank by assets isn’t in compliance with regulations announced in April and “we do have some technical issues that we want to thrash out,” Chief Executive Officer Michael Tomalin said in a conference call with analysts today.
The central bank said April 4 banks cannot lend more than 100 percent of their capital to local governments and the same to state-related entities. Institutions had until Sept. 30 to comply. There was no limit under previous rules.
“We are holding high-quality double-A bonds issued by top- quality Abu Dhabi issuers as part of our liquidity pool,” Tomalin said. There should be a distinction between marketable securities that a bank uses for managing funding levels from “overdrafts, which are obviously very different,” he said.
NBAD’s exposure to state-owned companies is in a large part through its holding of bonds, Tomalin said. “I don’t think the central bank would wish for us to sell these bonds and replace them with lower grade bonds to meet some concentration ratio.”
The lender expects an agreement which ensures that banks “are not overly exposed to any one particular borrower at the same time allows National Bank of Abu Dhabi to do its job,” he said.
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