The banking industry body plans a crackdown on misleading advertising as part of a series of self-regulating measures.
The UAE Banks Federation said it would appoint an independent monitor to enforce its code of conduct charter and create a new committee to oversee its 50 member banks and ensure customers are not misled by false advertising claims about interest rates and fees.
“The creation of a marketing committee by the federation and the commissioning of independent monitoring of advertising are tangible actions to reinforce observance of the federation’s code of conduct,” said AbulAziz Al Ghurair, the chairman of the federation and chief executive of Mashreq.
“[That is] namely that member banks should seek to behave in a transparent and honest way in their marketing communications.”
The UAE Banks Federation outlined in November 2013 a code of ethics for lenders with a focus on consumer protection. The federation’s code of conduct also includes customer service, relationships between banks, and management. The federation said at the time that it would rely on banks collectively regulating themselves without help from the Central Bank.
There were also plans to create a website that would allow consumers to expose lenders that provide bad service and products. Cracking down on overzealous bankers seeking to fulfil targets unethically is also on the federation’s code.
The charter comes at a time when banks are generating increasing revenues from personal lending products.
That is because a long stretch of low interest rates has made mortgages, personal and car loans more attractive.
Credit cards, often a bank’s most lucrative product, have also proliferated as the cost of living in the UAE rises.
This has meant that profit banks receive from fee income has increased, although often at the expense of clients.
“You have all sorts of charges that banks charge to customers,” said Taher Safieddine, an analyst at the Dubai-based investment bank Shuaa Capital. “It’s definitely a positive step.
“We’ve seen central banks in the region especially becoming more and more aware of capping fees that banks charge to customers, and the brightest example is what Saudi Arabia has been doing over the past two years,” he said. “They are becoming more strict on banks, capping fees that are being charged, fees on loans, fees on credit cards because banks have found more or less a way to add layers of extra charges on customers.”
Separately, at its meeting in Dubai the banking federation’s council also discussed – as proposed by the central bank of the UAE – to create a Higher Sharia Authority to complement and oversee the work of Sharia boards of individual Islamic banks in the country and to make sure that there is consistency among UAE banks when it comes to the development of products.
The banking federation council also added four new committees for auditing, operations, payments, IT and fraud at its meeting, it said.
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