Monthly Archives: May 2014

Plans to Protect UAE Banks After World Cup and World Expo Events

 

Banks in the UAE are making provisions to ensure that they are financially stable in the run-up to the 2020 Expo and 2022 Fifa World Cup. With these two exciting events in such close succession after one another, banks in the region are expected to fund expansion in the region leading up to the event.

However, the Institute of International Finance has warned that banks need to prepare for afterwards; so that when the events are finished, they can still support themselves and protect against things such as non-performing loans.

Both events are expected to contribute to domestic economic growth through bank loans for expansion, with visitors to the region expected to be in their millions. With the World Cup being held in Qatar, nearby Abu Dhabi and Dubai are guaranteed to see a huge boost to their already booming tourism and business industries.

Meanwhile, the successful bid for the World Expo event in 2020 will be the first time the Africa, the Middle East and South East Asia have ever hosted the event. A key global event, held every five years, it pulls in millions, observing events by businesses and organisations on topics like the global economy, progress and improved quality of life.

But the Institute of International Finance’s advice highlights that in order to maintain the UAE’s own improved quality of life, they must be careful about who they give credit to and how far they extend credit. Before they offer a generous bank loan.

This is because lending is expected to grow even further than last year – when it saw a 7.1 percent rise year on year, according to the UAE Central Bank – the fastest lending rate in 4 years. And in Qatar, domestic bank loan growth hit 12 percent last year.

Banks in the region are keen to avoid a repeat of 2009; the last time credit growth grew so rapidly, before the global financial crisis hit. Banks stopped lending almost altogether during that time, until only as recently as 2013 as they cleaned up their balance sheets.

It has taken time to rebuild the financial infrastructure to where it is today, and therefore, financiers are naturally going to be a lot more cautious to protect that working infrastructure. But thanks to a successful tourism industry and business sector, as well as a rebound in property prices in the last 18 months, demand in bank loans has improved again.

Banks are advising those that think they need a loan to evaluate your finances with the use of a loan calculator. That way, they can see how much their repayments would be and how much they could lend. By being sensible in this way, hopefully it can help to maintain a stable economy in the UAE.