The United Arab Emirates will struggle to impose new rules that are aimed at preventing a repeat of Dubai’s debt crisis by capping bank lending to government bodies, analysts and bankers say.
Local lenders are responding to the central bank’s decision in April to restrict lending to UAE government entities. The regulations limit banks to lending a maximum of 100 per cent of their capital base to government entities, with no more than 25 per cent of a bank’s capital to be loaned to any individual government borrower.
Fears over banks’ exposure to Dubai government debt in 2009 prompted concerns about the stability of the financial system. As the UAE seeks to recover from its debt woes, the authorities are trying to prevent future shocks.
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