Banks brace for increased defaults

Bankers expect loan defaults to rise in the next couple of months as uncertainty continues over the potential number of “skips” – people fleeing the country without paying their debts.

“There is always a marginal increase in delinquencies ahead of the summer. But this time there is clearly the worry that job losses will result in higher credit losses because people may not even come back,” said Sanjoy Sen, Citibank’s consumer bank head in the Gulf.

The UAE’s large transient population, and laws that oblige those without work to leave the country, together with a lack of historical reference points, make it hard for banks to judge their ability to recover bad loans from departing expatriates.

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