Bank’s Dh949,000 Claim Dismissed for Breaching Central Bank Regulations.
Abu Dhabi: A bank has lost its bid to recover nearly Dh950,000 from a borrower and her guarantor after the Abu Dhabi Commercial Court of First Instance ruled that it failed to comply with central bank rules protecting customers. The court found the lender did not secure sufficient guarantees before issuing the loan, violating regulatory requirements.
The bank had sought to make the two defendants jointly liable for Dh949,938, the remaining balance of a loan given to the first defendant, with the second serving as guarantor. It also requested 9% annual legal interest from the default date until full repayment, in addition to court fees and immediate enforcement, according to Emarat Al Youm.
The bank had sought to make the two defendants jointly liable for Dh949,938, the remaining balance of a loan given to the first defendant, with the second serving as guarantor. It also requested 9% annual legal interest from the default date until full repayment, in addition to court fees and immediate enforcement, according to Emarat Al Youm.
Court documents show the bank presented the loan agreement, account statement, and a copy of the guarantor’s undertaking. However, the judges concluded that the lender had not secured adequate guarantees or the required number of post-dated cheques corresponding to the instalment schedule.
In its ruling, the court referenced Article 150 of Federal Decree Law No. 6 of 2025 on the Central Bank and the regulation of financial institutions, which requires licensed lenders to obtain and maintain adequate guarantees for all credit facilities granted to individuals and sole proprietors, based on the borrower’s income and the facility’s value.
The law also prohibits courts and arbitration bodies from accepting claims by financial institutions where such guarantees were not obtained or preserved.
The court highlighted that lenders cannot rely on a single cheque covering the full loan unless repayment is due in a single instalment. For loans repaid in multiple instalments, separate guarantee cheques must match the number and value of the instalments, with their total value capped at 120% of the loan.
Judges concluded that the bank had issued the facility without securing any guarantees from the borrower or guarantor, violating central bank rules. While contracts are generally binding, the court emphasized that contractual terms cannot override mandatory legal provisions.
The claim was consequently dismissed, and the bank was ordered to cover the legal costs.
