4.1 General Responsibilities for Credit Policy

The board of directors, or a similar designated body of banks operating in the U.A.E. is responsible for its bank's credit policy and, therefore, must review, for information all facilities above a certain limit and approve all facilities above a higher limit. They must also ensure a fair structure and a balanced composition of their bank's credit portfolio.

Banks must formulate general credit policy instructions aimed at implementing a prudent lending structure, taking into account the risk arising from excessive exposures vis-à-vis governments, public sector entities, particular economic sectors etc., within the U.A.E. and abroad. Banks should exercise utmost prudence with regard to inter-bank exposures. The credit policy instructions must address both on-and off-balance sheet items.

A proper credit evaluation including appropriate documentation must be undertaken prior to granting any credit facility. The credit assessment has to be in line with each bank's general credit policy and must be based on an in-depth analysis of each customer's credit worthiness, reputation as a borrower and any information on loan-repayment history.

4.2 Special Responsibilities for Large Exposures

Notwithstanding the legal effectiveness of a transaction, a bank may only incur a large exposure on the basis of a unanimous resolution on the part of all members of its board of directors, or of a similar designated body, provided that the bank's general credit policy procedures have been followed. The resolution has to be passed prior to the lending and a copy of it must be placed on the customer's file.

4.3 Special Responsibilities for Exposures to Members of a Bank's Board of Director

A bank may only incur an exposure to a member of its board of directors, or of a similar designated body, on the basis of a unanimous resolution on the part of all members, except the member concerned, provided that the bank's general credit policy instructions have been followed. The resolution has to be passed prior to the lending and a copy of it must be placed on the member's file.

4.4 Assessment of Credit-Worthiness

Banks are obliged to ask their major borrowers to disclose reliable evidence of their financial situation by submitting financial statements, other relevant information and signed declarations of their independence from the bank, its principal shareholders, directors and officers. All such information has to be updated regularly. In exceptional circumstances, banks may refrain from doing so, if the requirement to disclose would be clearly unjustified due to the type and level of security provided.