United Arab Emirates’ banks plan to make recommendations to the central bank on replacing current laws which treat bounced checks as a criminal offence, according to the chairman of the Emirates Banks Association.
Other systems should be introduced to protect banks and businesses, Abdul Aziz Al Ghurair, who is also chief executive officer Mashreqbank PSC, told reporters in Dubai today. Emirates Banks Association, which represents the country’s lenders, is preparing a paper on the subject and will present it to the government, he said.
The number of bounced checks and the value of bad loans in the U.A.E., the second-biggest Arab economy, rose after businesses were hit by the global credit crisis and companies cut jobs, leading to a rise in the number of people arrested for the offence. About 40 percent of the 1,200 people in Dubai Central Prison have been convicted of defaulting on bank loans, Human Rights Watch said in a report in January 2010.
The check system “today its serving us well and without a holistic system in place it will be a catastrophe for business,” Al Ghurair said. If you move away from checks as a security “everybody will move to cash and the whole trade will change from a semi-secure payment mode to cash,” he said.
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