Monday, December 15, 2008

This is very, very scary, for several reasons

A page three article in The National today took my breath away: banks, fearing redundancies among their customers as the financial crisis hits the UAE, have been arbitrarily, and without proper notice, dramatically cutting credit limits and maximum ATM withdrawals. Can they even do that? They are, doing that. Can you imagine if this were to happen back home?

Even my bank, HSBC, has done so. I haven't received the Dec 11 letter yet informing me of the change. But I am just about to head out to buy a new laptop, so we will see what happens.

Things have changed so dramatically since I arrived eight months ago. We all opened accounts and joked about the level of credit they were throwing at us. Cards just seemed to keep arriving in the mail. A car loan was like hailing a cab. And I was told I could get a mortgage for a $500,000 Cdn property. The agent kept saying "two bedroom" when all I wanted was one.

8 comments:

Pranay Gupte Blog said...

Most banks around the world have limits on ATM withdrawals. My bank in the US allows no more than than $500 in withdrawals per day. Does that scare you? Any reason why you're singling out the UAE? Banks place such limits in order to deal with fraud and misuse of customers' funds.

Ann Marie McQueen said...

Duh, of course most banks have limits on ATM withdrawals.

Most banks do not dramatically and suddenly reduce those limits, and credit card maximums, and certainly not without informing their customers first, due to a fear their customers are going to be made redundant.

I am not singling out the UAE, merely commenting on a news story about an unusual situation that is happening here.

Pranay Gupte Blog said...

Duh? "Very, very scary, for several reasons"? And what might those reasons be?

JP said...

Seriously Pranay?

Graeme Baker said...
This comment has been removed by the author.
Graeme Baker said...

The situation in the UAE at the moment is sufficient for the banks to feel the economy will implode. The UAE consists of a city reliant on oil prices, which have fallen from $150 to $50 a barrel in the last few months, and a city built too high and too fast with toxic debt.

But there is also a very unique situation in the UAE: 80 per cent of the population comes from a foreign country. There is a certain risk element in giving such people lots and lots of credit, as they can get on a plane whenever they wish and default on their payments.

I'm not sure about how the law lies, but I very much doubt that many foreign countries have extradition treaties with the UAE regarding minor financial disputes.

Lastly, expats in this country are reliant on their employers for residency rights. If their job goes, they go.

Banks therefore feel there is now a risk of default on a large scale, from individuals who may lose their jobs or wish to get out while the going is good. Hence the problem, as stated in the article.

And of course, the amateur, arrogant and cack-handed way that it's been done is particularly UAE in flavour. But that's hardly surprising.

Ann Marie McQueen said...

Could not have said it better myself...

Abid said...

"I'm not sure about how the law lies, but I very much doubt that many foreign countries have extradition treaties with the UAE regarding minor financial disputes."

Pakistan, India do. Egypt does not. I think those three countries cover most of the expats (with the exception of the Philippines).