Banks in the United Arab Emirates risk becoming over-regulated amid tightening central bank rules that may hurt economic growth, said Abdul Aziz Al Ghurair, chief executive officer of Mashreqbank PSC.
Lenders in the country plan to introduce a code of conduct next year to help banks regulate themselves and “to avoid over-regulation,” Al Ghurair, who is also the chairman of the Dubai International Financial Authority and head of the Emirates Banks Association, said in an interview yesterday.
“Banks are concerned the central bank is imposing too many regulations,” he said. “If the trend continues, we’ll swing to heavy regulation. We need to have balanced regulation to encourage the economy.”
The U.A.E. has the lowest loan growth in the six-nation Gulf Cooperation Council this year as central bank rules restrict lending to the government and cap personal and retail credit. Loans and advances from banks in the second-largest Arab economy grew 2.7 percent in the first eight months of the year, on average, down from an average of 3 percent in 2011, according to central bank data.
Many lenders in the U.A.E. are still reeling from the fallout of debt restructurings by state-owned businesses including Dubai World Ltd., which shook global markets in 2009 with its request to delay $25 billion of debt payments. Banks also suffered as Dubai property prices slumped more than 65 percent at the height of the financial crisis and many homeowners skipped mortgage payments.
Al Ghurair said the local banking industry is starting to “bounce back nicely” after the downturn as retail sales, trade and construction pick up. Mashreqbank’s revenue will grow faster year-on-year in 2012 than it has done for the past four years, he said.