There is a serious misuse of the law that has been going on in the UAE, one that has not only unfairly, and unethically, harmed many people, but it has also created a distortion in the socioeconomic policies of the country. The perpetrators of this action are the banks.
Banks play an important role in society. At the most basic level they match lenders, people who have excess money they wish to get a return on, with borrowers, people who require money. Lenders, better known as depositors, neither have the time nor the skills to lend directly to borrowers, but banks do. Therefore, depositors are willing to entrust their money to an institution that can manage the funds and pay the depositor a return in the form of an interest rate on deposits. Borrowers benefit from being able to efficiently engage with lenders.
The main role of the bank is to manage the risks of all these loans. The main risk is the credit risk. It is here that we notice the beginnings of the misuse of the law. The banks are meant to manage the credit risk. This begins with a credit analysis, looking at primary sources of income, secondary sources of income, what assets can be used as collateral or security and other potential ways to reduce risk.
This is hard work and requires skilled employees and detailed processes that produce a deep understanding of the business or individual seeking to borrow money. Banks with strong credit processes and teams tend to make loans that are more likely to be repaid and therefore reduce risk.
Unfortunately, someone at some point found a way that they thought would help to reduce the risk to the banks. Now most, if not all, banks use this so called risk management method. This method is to take signed postdated cheques from the borrower, with the amounts equal to the repayments he needs to make. The catch for the borrower is that if any of the cheques bounce, then he or she will be immediately jailed. This method is used by banks to manage risk without putting any effort at a massive cost to the economy.
It is important to understand that cheques, legally known as negotiable instruments, basically act as a substitute for money. If someone wants to buy something that costs more money than they normally carry with them, they write a cheque.
A cheque is part of an immediate transaction. It is not normal to write a cheque for next month, let alone next year, let alone five years from now. Jailing someone for a bounced cheque is only sensible when cheques are used in immediate transactions.
Basically, this is to stop fraud, whereby people issue cheques that they know will immediately bounce. Unfortunately, this protection by the law of businessmen has been exploited by banks and others. Banks started to use cheques not as a substitute for cash in transactions but as security.
Normally security against a loan is an asset, such as shares or real estate. If a borrower cannot pay back his loan to the bank, then the bank can request the courts to allow it to sell the asset to recover its money.
This is normal credit risk management. Using a cheque as security changes this in two ways. The first is that the cheque is not a financial asset that can be sold or otherwise converted into cash to repay the bank. The cheque is instead used in such cases as a weapon, one that the bank can use to quickly put a borrower in jail.
Whereas the law was created to combat fraudulent issuance of cheques, the banks are using it to coerce troubled borrowers. Rather than work through the normal course of negotiating the issues, and working mutually through dialogue towards a resolution, the equivalent of a nuclear weapon is used.
That is the first perversion of the law.
The second perversion of the law is that the banks can use it to circumvent due process and the courts. The main issue in case of a troubled loan is just that: the loan. If there is ever a dispute on the loan, then the natural course of justice should be followed, not least of which is giving the borrower the chance to present his case to a judge before being jailed. Instead, the inappropriate use by banks of cheques as security has allowed them to circumvent the intent of the country’s legal system and deny borrowers their legal rights.
Such behaviour also affects the social policies of the UAE. For a troubled borrower, the only way to avoid jail after having issued security cheques to a bank is to leave the country. This is good for people who can easily flee. On the other hand, it greatly harms those who are most important to the UAE: Emiratis and residents with deep roots. This is an unjust use by the banks of a legitimate law enacted for different purposes.
The banks should refrain from using this unethical method of circumventing due legal process.
The Central Bank should intervene and ban banks from not only asking for security cheques, but from using any security cheques currently in their custody. The Central Bank should insist that banks actually discharge their duty of managing risk using the conventional methods of analysing repayment sources and financial asset collateral.
The Government might consider differentiating between how to handle fraudulent cheques issued against an actual transaction, such as buying goods and services, and how it handles security cheques, which banks seem to use as a substitute for good credit analysis and risk management.
An economy can grow only if there is a fair and equitable balance between all of its stakeholders. The banks already have a massive advantage, both in terms of financial resources and in relevant knowledge. Borrowers are in need of assistance as it is, and the arming of the banks with such a powerful legal advantage as provided by security cheques is not only detrimental to borrowers in the short term, but is detrimental to the economy in the long term.
Sabah Al Binali is an active investor and entrepreneurial leader, with a track record of financing, building and growing companies in the Mena region.
business@thenational.ae
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Brief scoreline:
Crystal Palace 2
Milivojevic 76' (pen), Van Aanholt 88'
Huddersfield Town 0
The Details
Article 15
Produced by: Carnival Cinemas, Zee Studios
Directed by: Anubhav Sinha
Starring: Ayushmann Khurrana, Kumud Mishra, Manoj Pahwa, Sayani Gupta, Zeeshan Ayyub
Our rating: 4/5
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
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UAE currency: the story behind the money in your pockets
The specs
Engine: 3.9-litre twin-turbo V8
Power: 620hp from 5,750-7,500rpm
Torque: 760Nm from 3,000-5,750rpm
Transmission: Eight-speed dual-clutch auto
On sale: Now
Price: From Dh1.05 million ($286,000)
UAE currency: the story behind the money in your pockets
THE BIO: Martin Van Almsick
Hometown: Cologne, Germany
Family: Wife Hanan Ahmed and their three children, Marrah (23), Tibijan (19), Amon (13)
Favourite dessert: Umm Ali with dark camel milk chocolate flakes
Favourite hobby: Football
Breakfast routine: a tall glass of camel milk
UAE currency: the story behind the money in your pockets
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David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
Company Profile:
Name: The Protein Bakeshop
Date of start: 2013
Founders: Rashi Chowdhary and Saad Umerani
Based: Dubai
Size, number of employees: 12
Funding/investors: $400,000 (2018)
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
Tips to stay safe during hot weather
- Stay hydrated: Drink plenty of fluids, especially water. Avoid alcohol and caffeine, which can increase dehydration.
- Seek cool environments: Use air conditioning, fans, or visit community spaces with climate control.
- Limit outdoor activities: Avoid strenuous activity during peak heat. If outside, seek shade and wear a wide-brimmed hat.
- Dress appropriately: Wear lightweight, loose and light-coloured clothing to facilitate heat loss.
- Check on vulnerable people: Regularly check in on elderly neighbours, young children and those with health conditions.
- Home adaptations: Use blinds or curtains to block sunlight, avoid using ovens or stoves, and ventilate living spaces during cooler hours.
- Recognise heat illness: Learn the signs of heat exhaustion and heat stroke (dizziness, confusion, rapid pulse, nausea), and seek medical attention if symptoms occur.
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The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
box
COMPANY PROFILE
Company name: Letstango.com
Started: June 2013
Founder: Alex Tchablakian
Based: Dubai
Industry: e-commerce
Initial investment: Dh10 million
Investors: Self-funded
Total customers: 300,000 unique customers every month
The specs: 2018 Opel Mokka X
Price, as tested: Dh84,000
Engine: 1.4L, four-cylinder turbo
Transmission: Six-speed auto
Power: 142hp at 4,900rpm
Torque: 200Nm at 1,850rpm
Fuel economy, combined: 6.5L / 100km
GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
Know before you go
- Jebel Akhdar is a two-hour drive from Muscat airport or a six-hour drive from Dubai. It’s impossible to visit by car unless you have a 4x4. Phone ahead to the hotel to arrange a transfer.
- If you’re driving, make sure your insurance covers Oman.
- By air: Budget airlines Air Arabia, Flydubai and SalamAir offer direct routes to Muscat from the UAE.
- Tourists from the Emirates (UAE nationals not included) must apply for an Omani visa online before arrival at evisa.rop.gov.om. The process typically takes several days.
- Flash floods are probable due to the terrain and a lack of drainage. Always check the weather before venturing into any canyons or other remote areas and identify a plan of escape that includes high ground, shelter and parking where your car won’t be overtaken by sudden downpours.
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The specs
Engine: 5.0-litre supercharged V8
Transmission: Eight-speed auto
Power: 575bhp
Torque: 700Nm
Price: Dh554,000
On sale: now
Killing of Qassem Suleimani
KILLING OF QASSEM SULEIMANI
THE SPECS
Engine: 3.6-litre V6
Transmission: eight-speed automatic
Power: 285bhp
Torque: 353Nm
Price: TBA
On sale: Q2, 2020
'The Predator'
Dir: Shane Black
Starring: Olivia Munn, Boyd Holbrook, Keegan-Michael Key
Two and a half stars
