Central Bank calls for speedy mortgage law review

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Central Bank of the UAE Governor chairs the meeting of its board members. Photo – WAM

In a recently issued statement, the UAE’s central bank has called for early finalization of a review of regulations on mortgages, banks’ loan exposure and liquidity.

Last year, the central bank had imposed regulations to limit risk at UAE commercial banks three times over the past year. The proposed rules limited banks’ exposure to state-linked borrowers and required the institutions to hold a certain ratio of their assets in the form of liquid instruments. The proposed changes were also aimed to prevent overheating of the property market and reduce loan defaults.

In response to the central bank, Emirates Banks Association (EBA) had pushed for capping second mortgages at 60 percent and 65 percent for expats and nationals, respectively. Further, loans for properties still under completion were proposed to be limited to 50 percent of its value. This move was aimed at minimizing the rapid sale of off-the-plan properties.

However, the proposed rules were suspended after discussions with the banks as they expressed their unhappiness over them. In January, the central bank also decided not to enforce curbs on residential mortgage loans as a proportion of property values. The UAE lenders sought clarification regarding the new rules and a final decision by central bank would be made keeping in mind the proposals of EBA.

The central bank’s statement reads that, “the Board instructed speedy finalization of the review of all articles of the said regulations to expedite approval and ensure timely implementation thereof. The board also discussed a number of issues relating to liquidity levels and ratios aimed at achieving a sustainable balance between deposits and loans at banks operating in the UAE.”

The central bank is hoping to resolve all issues regarding the rules and policies so that they may be put into force this year.

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