Landmark credit rating firm soon

The UAE will soon launch a landmark credit information company to provide information to banks on clients seeking loans as part of an ongoing government plan to bolster the financial sector and face fresh crises in the future.

The ministry of finance has completed the organizational structure of the company and provide Dh120 million for its capital, which could be raised later to Dh200 million, said its undersecretary Yunus Khoury said.

“It will be a government establishment with a task to help banks in determining the credit status of clients…the company will have a paid up capital of Dh120 million and authorised capital of Dh200 million,” Khoury told 'Al Ittihad' daily.

“It will be owned mostly by the federal government but will have an autonomous status…it will provide credit information to banks on clients as it will set up a credit data facility….the board of directors will be soon named by the cabinet,”Khoury gave no other details but in recent statements, central bank governor Sultan bin Nassir Al Suwaidi said the planned company would provide data on individual borrowers and local small firms seeking loans from the country’s 23 national banks and 28 foreign units.Suwaidi said such information would allow the banks to obtain complete and accurate data on any client before they approve any loan.

“The credit information company being established will cover only individual borrowers and small firms seeking loans….banks wishing to get information about those borrowers will have to buy data from the company,” Suwaidi said.

“This of course will enable banks to get full and accurate information about borrowers as the information to be provided by this company will be comprehensive…it will include the size of the existing debt of the individual or firm and their financial obligations inside the UAE, including those owed to national establishments such as Etisalat and the electricity and water firms.”

"Establishing this company is a positive step and will be a huge support for lenders, borrowers and macro-economic stability of the country…. it will also enable banks and other lenders to gain a more comprehensive view during their decision-making,” Khoury said.

The UAE, the second largest Arab economy, already has a credit data bureau, which was set up in Dubai nearly eight years ago on orders by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai.

Emcredit was initiated by Dubai’s Department of Economic Development in 2003 and is the first private and independent credit information services company in the country.

In recent remarks, a top Arab banker said the UAE and other Gulf oil producers need to set up local credit rating systems to avert lending risks and ensure a severe debt default crisis that hit the region in 2009 will not be repeated.Adnan Youssef, chairman of the Beirut-based Union of Arab Banks (UAB), said he had proposed the project at talks with the central bank governors in the six-nation Gulf Cooperation Council (GCC) in late 2009.“The proposal is still under discussion by the GCC… it was also debated by the Gulf Monetary Council. I expect it to materialise in the next few years,” he said.

“I believe the GCC countries need such a credit agency as much as they need to put their monetary and financial sector in order. They need information about the local financial institutions, the size of debt, banks’ balance sheets and data on the banks’ clients for their monetary union.”

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