UAE: Don't give out loans without adequate guarantees, court tells banks
Abu Dhabi judicial authorities warn banks against flouting loan norms
Do not give out loans to individuals and companies without sufficient guarantees, the judicial authorities have warned banks and financial institutions in the UAE.
The Abu Dhabi Judicial Department cautioned that failing to do so will be deemed violation of the requirements and controls regulating the provision of loans, which may result in the non-acceptance of cases filed by banks before the Abu Dhabi Courts.
The move follows marked increase in the number of disputes and claims filed by banks against individuals and companies in Abu Dhabi.
“Considering a large number of these cases, the Abu Dhabi Judicial Department courts has found that the guarantee provided by a borrower is not equal or proportional to the value of loan, and in some cases, banks disburse money against the borrower’s personal guarantee or his identification papers only,” judicial officials said in a statement issued on Tuesday.
The judicial department reminded banks of the need to adhere to the requirements for granting loans and to obtain adequate guarantees, ensuring thereby that borrowers have the financial ability to settle their loans.
“This is in accordance with the established regulations that are subject to oversight and scrutiny by the regulatory authorities in the country. In case of compliance with such regulations, claims filed before Abu Dhabi courts will be surely admitted; at the same time judgments issued against debtors will be easily enforced,” pointed out officials.
According to authorities, banks and other financial institutions at the state level bear the legal responsibility, before providing any loans, to ensure the adequacy of loan applications, and that the creditor has the ability to repay it. They can, therefore, use all available means for inquiry, taking into account that the size of the facility must match the creditor’s income.
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