Abu Dhabi Judiciary warns against granting Loans without sufficient guarantees

The Abu Dhabi Judicial Department has warned banks and financial institutions of giving loans to individuals and companies without sufficient guarantees, that would secure the ability of the borrower or his guarantor to pay back. Failing to do so is deemed violation of the requirements and controls regulating the provision of loans, which may result in the non-acceptance of cases filed by banks before the Abu Dhabi Courts.

This comes in light of the noticeable increase in the number of disputes and claims filed by banks against individuals and companies. Considering a large number of these cases, ADJD courts has found that the guarantee provided by a borrower is not equal or proportional to the value of loan, and in some cases, banks disburse money against the borrower’s personal guarantee or his identification papers only.

The Judicial Department warned banks of the need to adhere to the requirements for granting loans and to obtain adequate guarantees, ensuring thereby that borrowers have the financial ability to settle their loans. This comes in accordance with the established regulations that are subject to oversight and scrutiny by the regulatory authorities in the country. In case of compliance with such regulations, claims filed before Abu Dhabi courts will be surely admitted, at the same time judgments issued against debtors will be easily enforced.

Banks and other financial institutions at the state level bear the legal responsibility, before providing any loans, to ensure the adequacy of loan applications, and that the creditor has the ability to repay it. To this end, they can use all available means for inquiry, taking into account that the size of the facility must match the creditor’s income.