Banks in the United Arab Emirates are seeking five years to comply with a central bank regulation to limit their exposure to government entities in the second-biggest Arab economy.
The banks seek to “exclude marketable bonds, sukuks from the proposal, and to apply means and purpose test in order to determine whether the large exposure regulation applies to an entity, and to consider five years term to fully comply with these regulations,” the U.A.E. Banks Federation said in an e-mailed statement today.
The central bank said in April 2012 that banks must not lend more than 100 percent of their capital to local governments and the same amount to government-related entities to help reduce risk, and must comply with the new regulations before by Sept. 30, 2012. There was no limit under previous rules.
The banks federation said the central bank postponed the September deadline to allow lenders to “study, evaluate” the new rules and to revert back to the regulator with a final proposal.
Many U.A.E. banks suffered from an increase in bad loans linked to debt restructuring by state-owned businesses including Dubai World, which roiled global markets in 2009 with its request to delay payments on $25 billion in loans.
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