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UAE Central bank to study margin lending

Dubai — The Central Bank of the UAE discussed margin lending at a board meeting this week and ordered that all aspects of the issue be studied.

In a brief statement on Wednesday, the central bank board, which met under the chairmanship of Khalifa Mohammed Al Kindi, discussed banks’ large exposures and positions of banks in general.

The board reviewed a report containing a dashboard for measuring banks positions, submitted by the Banking Supervision Department. It also discussed margin lending, and requested that the issue be studied and a report on findings be forwarded to the board.

The board, then proceeded to discuss the remaining topics listed on its agenda, as well as other emerging topics and took appropriate decisions in this regard.

The Dubai stock index has swung wildly this year, soaring as much as 60 per cent and then giving up all those gains at one stage. Leveraged buying of stocks through margin trading at brokerages has sometimes fuelled speculative buying, fund managers believe.

Last week, the UAE’s Securities and Commodities Authority urged brokerages extending margin trading services to obey regulations and sell clients’ shares if shortages in their accounts were not filled on time. Earlier this month, a central bank official said the bank was looking at proposals for new rules covering commercial bank lending against shares.

The meeting was attended by Khalid Juma Al Majid, deputy chairman; Mubarak Rashed Al Mansoori, Governor; and board members Younis Haji Al Khoori, Khalid Mohammed Salem Balama, Khalid Ahmed Altayer, Hamad Mubarak Bu Amim.

Mohamed Ali bin Zayed Al Falasi, Deputy Governor; Saeed Abdullah Al Hamiz, Assistant Governor for Banking Supervision; Saif Hadef Al Shamsi, Assistant Governor for Monetary Policy and Financial Stability; and senior banking supervision division staff also attended the meeting.