The Central Bank and Abu Dhabi Judiciary warn against granting bank loans to individuals without sufficient guarantees

The Abu Dhabi Judicial Department warned against granting banks and financial institutions, bank loans to individuals and companies without sufficient guarantees on the ability of the borrower or his guarantor to pay, which is the second time that the department’s warning is mentioned, after a reference from the Central Bank to this warning in its circular On the same topic yesterday.

In detail, the Abu Dhabi Judicial Department again warned against granting banks and financial institutions, bank loans to individuals and companies without sufficient guarantees on the ability of the borrower or his guarantor to repay, as this is considered a breach of the requirements and controls regulating granting loans, which may result in non-acceptance of loans. Cases filed by banks before the Abu Dhabi Courts.

This comes in light of the noticeable increase in the number of disputes and lawsuits restricted from banks against individuals and companies, which showed through the consideration of a large number of them, that the guarantee is not equal to or proportional to the loan, and there is a large discrepancy between the value of the guarantee and the amount of the loan, and in some cases, the disbursement of Money for just a personal guarantee.

The Abu Dhabi Judicial Department warned of the necessity of complying with the requirements for granting loans and obtaining sure guarantees that the borrowers have the financial ability to pay them, in accordance with the established regulations that are subject to oversight and scrutiny by the regulatory authorities in the country, in order to ensure the acceptance of cases before Abu Dhabi courts and the implementation of judgments issued on debtors. .

Yesterday, "Emirates Today" published a circular asking the Central Bank, banks operating in the country, to adhere to the requirements for granting loans to individuals, and to ensure that there are sufficient and confirmed guarantees on the borrower's ability to pay, and that the credit facilities granted to them are commensurate with their monthly income, stressing that granting them these Loans without these guarantees, it is a supervisory violation of the Central Bank Law, and other relevant regulatory rules and regulations.

The Central Bank, in its circular No. (3944 / 2021), of which Emirates Today obtained a copy, indicated a statement from the Abu Dhabi Judicial Department that it did not accept any lawsuit before the Abu Dhabi courts, filed by banks and finance companies related to this aspect, And that judgments issued against individual debtors will not be implemented, if it is proven that they did not provide guarantees to repay the loan to the bank.

In addition, Islamic Finance Adviser, Amjad Nasr, said that “the Central Bank is strict about lending to individuals, in order to maintain economic and social stability at the same time,” noting that some banks may be lenient with individual borrowers in terms of guarantees, which affects the Their ability to repay, which is a two-fold aspect, the first is economic and related to the lending bank increasing more provisions, which affects its profits, and the second is social and related to the borrower, which could affect his family and social stability, stressing that strictness in lending standards is commendable by The Central Bank, with the necessity of taking sufficient guarantees from the customer or his guarantor, to ensure the repayment of the loan and to guarantee the rights of depositors to the bank, and to ensure the customer’s ability to pay, and that his social stability is not affected by deliberate and systematic lending.

For her part, the legal advisor, Shawq Al Kathiri, said that bank guarantees are, on the one hand, a means through which customers can submit them to obtain loans, and on the other hand, they are a tool to prove the bank’s right to recover the money it lent, including its interests and fees, in the legal way, but the risk is an inherent element. of the loan, and the possibility of its occurrence cannot be excluded, which is why banks must deal with it cautiously.

For this reason, His Highness the President of the State issued his Royal Decree on 27/2/1995 not to accept lawsuits filed by banks, unless the bank proves the solvency of its client or his guarantor while taking sufficient guarantees.

However, given the excessive granting of loans without sufficient guarantees that the borrower or his guarantor will be able to pay, which is a violation of the requirements and controls regulating the granting of loans, in accordance with the Supreme Order, noting that the warnings from Abu Dhabi judiciary are related to the necessity of complying with the requirements of granting loans. loans and obtaining sure guarantees that the borrowers have the financial ability to repay them, in accordance with the established regulations and subject to oversight and auditing by the regulatory authorities in the country, in order to ensure the acceptance of cases before Abu Dhabi courts and the implementation of judgments issued on debtors, in order to activate and confirm the validity of the provisions of the decree issued on 27/2 /1995, so that banks and financial institutions bear the legal responsibility if they are not sure before they provide loans, that the person requesting the loan is able to repay it, using all available means and means of inquiry, taking into account the proportion of the size of the facilities with the income.

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