UAE Banks Federation Launches Significant Rescue Initiative for SMEs and medium-sized Corporates
The UAE Banks Federation, the professional body which represents 49 banks in the UAE, has formally launched a new initiative to support Small to Medium-sized Enterprises (SMEs) and mid-sized corporates experiencing repayment difficulties, during a press conference held today, March 28th, in Dubai.The first-of-its-kind initiative in UAE comprises a new mechanism (called the “modus operandi”) to sustain indebted companies which meet specific qualifying criteria.The conference was headed by H.E AbdulAziz Al Ghurair, Chairman of UAE Banks Federation, and joined by Mahdi Kilani, Head of SME Committee, and Amr Nokaly, Head of Wholesale & Corporate Committee.
The mechanism will be applicable to companies which have borrowed AED 50 million or more from a number of banks and are showing signs of financial stress, often leading to theinability to service their debts. Under the modus operandi the UAE Banks Federation will play a co-ordinating role(as Remedial Credit Co-ordinator) which will be initially to receive notifications from banks of corporate customers who have ‘skipped’ or who are concerned that multi-banked corporate clients are showing signs of financial stress that could lead to restructuring. The Federation would also be the contact point for corporate borrowers for assistance in restructuring their debts where more than one bank is involved. The Modus Operandi will also be applicable for borrowers of total exposure of less than AED 50 Million whereby they can approach the lending banks directly.The initiative calls for SMEs committee recommendations among banks to share information and to cap the maximum exposure of unsecured per customer as well as the number or value of unsecured loans to a single customer.
As Remedial Credit Co-ordinator the Federation will advise the borrower, and all lenders, of the issuance of a standstill agreement on behalf of the concerned banks. At this stage, led by the largest lending bank all the lending banks will jointly determine how the client’s indebtedness will then be best managed.
This initiative has been brought about as a result of the increasing level of default being seen in the SME& Corporate segments of UAE bank lending. The modus operandi process is expected to take a maximum 15 days from the first meeting of lenders to the conclusion of agreement with the borrower. No bank will resort to legal action during this period.
His Excellency AbdulAziz Al Ghurair, Chairman of the UAE Banks Federation, commented: “As I have said previously, lending to SMEsis a top priority for all UAE banks.Current concerns about the sustainability of SME and corporate lending and its effect on the economy as a whole has led theFederation to take a more pro-active role in bringing together banks and borrowers to minimize incidents of total default. We believe the modus operandi now launched will help to restore market stability, stem credit losses and maintain the reputation of the UAE as a place to do business.”