CBY warns of granting loans to blacklisted parties [Archives:2006/921/Local News]
By: Yasser Al-Mayasi
SANA'A, Feb. 14 – This week the Central Bank of Yemen (CBY) demanded all commercial and Islamic banks operating in Yemen improve their financial state, increase their capital and conduct banking activities according to law.
The CBY insisted other banks raise their capital to 6 billion Riyals as soon as possible or begin integrating with each other if unable to apply recently issued laws and decisions.
During his meeting with different bank managers this week, CBY governor Abdurrahman Al-Samawi affirmed that banks operating in Yemen must not grant loans to those who never fulfill their obligations or repay their debts.
According to Al-Samawi, the CBY has labeled such parties irresponsible and blacklisted them according to banking and CBY law. The CBY distributed a general note to all banks operating in Yemen warning them of granting loans or deposit facilities to 323 individuals, trade firms and small stores listed in its note.
The CBY published such names in its general note after Watani Bank (a commercial bank operating in Yemen) declared bankruptcy and formed a special committee from banking's monitoring sector to study data presented by commercial and Islamic banks.
The committee conducted questionnaires and collected field data in light of which it decided to prevent banks from granting loans to those blacklisted including businessmen, influential parties and citizens indebted to local banks. The committee approved the decision for all banks nationwide.
The CBY blacklist contains names of prominent individuals, trade and service firms, tourism and travel agencies, hotels, private hospitals and commercial groups. Additionally, some real estate offices, stationery stores, egg and sweet shops were blacklisted as well.
The combined budget of commercial and Islamic banks operating in Yemen grew by 14 percent in 2005, reaching YR 754 billion by the end of 2005 as compared to YR 660 billion in 2004, a YR 94 billion increase. CBY savings abroad rose to more than $6 billion in 2005.
In the light of exchange rate stability in Yemen, the CBY announced that it reduced obligatory savings on foreign currency deposits from 30 percent to 20 percent, but approved holding obligatory savings on local currency deposits at the usual rate of 10 percent.
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