To all Abu Dhabians whom will join, or already in banking sector to add extra more tips to their valuable information, this short study had been prepared by the researcher MR Mohamed G Binmaha Almazroui, 15 years of banking experience
Guarantees required against banking facilities for real estate incomes
Official communication and follow up between bank officials and governmental authorities.
The protection of the rights of the shareholders of any bank, in any country, is based on the governmental system of the said country and the laws adopted thereby.
For the contribution of the banking system is the primary generator of economy in all countries. Thus, these laws supply a foundation that preserves banks’ rights as well as their shareholders’ rights simultaneously.
Commercial laws and legislations highlight the degree of banks’ rights with respect to their economy-generating operations all over the world, especially through corporate accounts, and through degrees of understanding and transparent transaction with such vital contribution, as well as directing banking facilitations entirely towards their intended purposes. Therefore, it is important to continually educate the client as to the importance of such collaboration. Such a task falls upon the client’s chief accountant, whether at the bank or at the client’s office. 80% of such clients possess innumerable guarantees to match the facilitations required to cover project expenses of variable sizes. Some of these are huge projects for which bank support is essential, which is where the corporate client comes into play. As I have already emphasized, all transactions are based on mutual understanding between all parties, as well as a mutual desire for continual growth.
Back to the issue of real estate guarantees:
When a client applies to a bank in order to present guarantees in the form of commercial buildings, villas or industrial estates (i.e. immovable guarantee), it is the duty of the bank or its officials to express a positive desire to deal with this new client, and to ask for a grace period to study the matter thoroughly. The credit manager must then promptly send copies of all the presented guarantees to the real estate department and the legal department, and to urge them to accelerate follow up procedures and issue their reports to the concerned branch as soon as possible. If the reports meet all the requirements, they are forwarded to the credit committee in headquarters for acceptance or refusal, which is ultimately bound by bank policy. In most cases, these estates are owned by more then one person – a situation of inheritors – where the proxy of the inheritors may be the applicant for facilitations. This is where the legal department comes into play, through follow up the matter, and investigating with courts, governmental legal authorities, or departments concerned with monitoring the rights of minors (who are not of legal age). Special heed ought to be paid to the validity of the client’s power of attorney, noting that the legal term for a power of attorney from courts – I. e. The validity of the power of attorney must not exceed two years when presented to bank. The purpose of all this is the protection of all parties involved. As for real estate departments, their role is limited to monitoring the market value of the said estate. The credibility of their stated income, and whether such estates may be mortgaged to bank interest, and if so, whether it is a first or second degree mortgage, in addition to the life expectancy of the estates and whether it fits the required facilitations value. When all the above is established without any obstacles, investigation is carried forth to another level: Where will the facilitations be invested? And what are the intended projects?
What is the role of the bank officials moving back and forth between the bank and social and governmental bodies for the purpose of preserving bank rights? What is the degree of their involvement with the community as a whole and with its establishments?, What is the process by which a piece of data that is useful to the bank is acquired, and how is this process carried out?
A bank official with social responsibilities and connections must avoid personal gain, he should interact with the community within the boundaries of professional requisites, and evade side-relations with clients at the expense of his work. This would prevent legal suspicion should any legal disputes arise between the bank and the client. A bank official must also possess great intelligence, foresight and thorough knowledge of the consequences of any damaging actions in the near and future according to customary banking expertise. When a bank demands of an indebted and financially incapable client to settle his debts, the indebted client usually resorts to mentioning former transactions and calling forth employees that he has provided with aid in the past. When the client mentions such transactions involving bank employees before legal authorities, the employee may as well have condemned himself and pled guilty to dishonesty. Thus, bank officials must take due care and caution in dealing with clients, and endeavor to appear in light of the educated, well-aware advisory in order to earn the client’s respect for bank employees. Bank officials must also avoid dwelling with the client on side-issues that are not associated with banking. Most banks present their clients with non-financial gifts at the beginning of every financial year, thus, such gifts must be distributed without indicating any favor towards the client, noting that the value of these gifts is deducted from the profit incurred by the bank through banking transactions with the clients. Moreover, whenever the bank interest rate is affected by the rise or decline of the US Dollar value, the client is promptly informed of this change through a written notification. For , all agreement documents quote an interest rate that is different from the interest rates calculated today. This also prevents misunderstandings, which are to be always expected, of client accounts that quote the interest rate agreed upon at the beginning of transaction and cooperation between the bank and the client. However, such situations are usually resolved with ease. I call upon bank officials to cut themselves no slack in marketing processes in order to draw forth as many clients as possible. Here, the trick is to focus on quality not on quantity of clients, and never to despair or suspend marketing. This is especially important since each bank branch and bank department is required by headquarters to achieve maximum annual profitability. Thus, every bank official must save no effort with regard to liability to achieve the maximum end, which in turn contributes to generous bonuses and salary raises for everyone at the end of each year.
The bank branch manager or department head must be fair and objective in his annual reports, and endeavor to present headquarters with the real picture. For, it is to be noted that no official from headquarters is present at the branch or department all year round, thus the manager/ head must evade being unjust to any employee, so that the final report is authentic and objective.
It is also to be noted that all banks in UAE house a wide array of nationalities, therefore, special care must be given to avoid racism and discrimination when writing such reports.
A very brief on banking to Abu Dhabian nationals, our excessing and future bankers >
Deepest Regards,
Mohamed G Binmaha Almazroui.
15 years of banking experience .
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