By: Amr Adel
Dubai - Mubasher: The United Arab Emirates (UAE) will soon have a new mechanism for calculating bad loan provisions, according to Abdul Aziz Al Ghurair, chairman of UAE banks federation (UAEBF).
The new mechanism will calculate provisions with a prospective effect, instead of the currently used retroactive effect, it will also consider debt evaluation and risk assessment, Al Ghurair explained to journalists.
Previously, the UAE central bank obliged banks to set general provisions at 1.5% of total loans, but according to the new way, provisions will be specified before granting the loans through the evaluation of every account, he added.
The UAEBF chairman also revealed that there is a new anticipated way to calculate Emirates Inter Bank Offered Rate (EIBOR), as the banks federation in cooperation with the central bank are adopting a new initiative to reconsider EIBOR calculation.
Al Ghurair also expects loan interests to rise in the upcoming year, saying that the era of low interest rates is over after investors enjoyed it for the last five years.
As for the forecasted financial results for the Emirati banking sector, Al Ghurair expects a decline in profits by 10% to 20% by the end of 2016, he also expects UAE banks to see a rise in profits in 2017.
The UAE banks federation has also decided to form a committee specialized in cyber security to face any online or electronic threats, said Al Ghurair who added that the risks from cyberattacks are growing worldwide, but the federation has not received any reports of such attacks from the UAE banks.
Translated by: Moslem Ali
