Bank provisions for problem loans in the UAE surged 36 percent in December from a year earlier, the federation’s central bank said on Monday.
Provisions rose to AED44.3bn ($12bn) in December from AED32.6bn a year earlier, according to data posted on the central bank’s website. Deposits exceeded loans for the third month and rose 6.8 percent to AED1.05 trillion. Loans rose 1.3 percent to AED1.03 trillion.
The UAE is struggling to boost bank lending after a credit squeeze in a market that had been growing more than 30 percent annually in the previous three years.
The central bank last year cut its benchmark repurchase rate to one percent and the government guaranteed local bank deposits and interbank loans, created a AED50bn credit facility and said it would provide banks with AED70bn.
The UAE’s recovery from the global crisis may be hurt by a shortage of investment projects in Abu Dhabi, the largest and richest emirate, Cairo-based investment bank EFG-Hermes Holding SAE said in September. Another obstacle is reduced spending in Dubai, which is trying to renegotiate bond payments and cut debt, the bank said.
In November, the central bank said banks should book provisions for bad loans quarterly instead of waiting until year end. The guidelines classify loans and provisions in line with the Basel Committee on Banking Supervision standards.
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