On 16 August 2021, through Notice No. CBUAE/BSD/2021/3944, the UAE Central Bank issued a notice to all banks and financial institutions operating in the UAE requiring strict adherence to the requirements outlined under Regulation No. 29 of 2011, Regulation Regarding Bank Loans and Other Services Offered to Individual Customers No. 29 of 2011, with its amendments and clarifications.
Pursuant to the notice, in granting loans to individuals, banks are required to ensure the existence of “sufficient and definite assurances” on borrowers’ or respective guarantors’ capacity to repay the loan (including the use of credit reports from Al Etihad Credit Bureau) and that the loan or facility granted is commensurate with the monthly income of the borrower.
In this respect, the UAE Central Bank further advised that it will monitor all financial institutions regarding the application of such standards and non-compliance will be regarded as a regulatory violation of the UAE Central Bank laws, rules and regulations, resulting in the imposition of administrative fines and penalties with strict measures.
The notice further cited a statement by the Abu Dhabi Judicial Department to the effect that the Abu Dhabi Courts will not accept lawsuits by financial institutions against borrowers nor enforce any judgments against individual debtors in the event it is proven that the relevant loan was provided without the necessary assurances of the borrower’s financial ability to repay.