"The UAE is hitting a serious obstacle in developing its financial markets because of the lack of a bankruptcy law, and risks falling behind other Arabian Gulf states that are moving to address the problem, said the head of National Bank of Abu Dhabi.
Michael Tomalin, who retires next month after 14 years as the chief executive of the UAE's biggest bank, told The National that lenders and their clients faced a higher cost of doing business as a result of the way that banks must account for exposures to third parties.
The problem centres on the way that banks process the "netting" of foreign exchange contracts. For example, in many financial centres if a bank sells US$500 million to one bank, but buys $450m, it can "net" the two contracts and hold capital against a net exposure of $50m in the event of financial difficulties."
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