DUBAI: The head of the United Arab Emirates Banks Federation has called for sanctions to be introduced to back up the country’s new mortgage law, including suspending banks from offering real estate products.
The Gulf Arab nation is bringing in new regulations to imposed limits on mortgage lending, to prevent another boom-and-bust cycle after a property market crash in Dubai and Abu Dhabi at the end of the last decade. That crash saw property prices drop more than 50 percent and left banks nursing billions of dollars of soured real estate loans.
The new rules, set to come into effect on December 1, are less stringent than first proposed after extensive lobbying by banks through the UBF. Its head, Abdulaziz Al Ghurair, said the organisation got everything it asked for in negotiations with the central bank, except in relation to limits on mortgages for properties worth over 5 million dirhams ($1.4 million); he did not elaborate.
Now the federation will approach the central bank to amend the law to include penalties for banks and bankers who break the rules. No formal sanctions are currently in the regulations.
“We want the central bank fining banks if they violate this,” Ghurair, who is also chief executive of Dubai’s Mashreq bank, told reporters at a media event.
“Not only fining, we want also the central bank to suspend banks from doing that particular product if they have violated the central bank (rules).
“And we want any individuals found violating, they should be suspended from working in the UAE at all.”
The real estate sector in Dubai has boomed this year as confidence returns to the market, with prices jumping more than 20 percent in the last 12 months, prompting the International Monetary Fund to warn of the risk of another bubble forming.
Reuters
