Zawya reported that UAE Central Bank has dismissed fears of a possible US style subprime crisis in the Emirates, saying real estate mortgage loans by local banks had remained a fraction of the country's economy compared to the United States.

Mr Sultan bin Nasser Al Suwaidi Central Bank Governor said that the mortgage lending situation in the UAE can be best evaluated by comparing it to countries where the ratio of such loans had surpassed the GDP.

Mr Suwaidi that "Real estate mortgage loans have accounted for as high as 101% of the GDP in the US and around 86.3% in Britain. In the UAE, the ratio of mortgage loans extended by local banks was only 17.8% of the GDP at the end of 2008."

His figures showed the UAE's 24 national banks and 28 foreign units had provided around AED 172.7 billion in real estate credits until the end of 2008, an increase of around AED 57 billion since the start of last year. He said that the loans remained below the banks' combined reserves of Dh180bn.

Mr Suwaidi was apparently reacting to recent warnings by regional financial institutions about the specter of a US style subprime crisis in the UAE due to excessive mortgage lending by its banks during the oil boom. But bankers believe such warnings are unrealistic on the grounds the UAE does not have a subprime market and unlike in the US, banks have not generally been involved in derivatives and other complicated instruments while all lenders and debts are known.

(Sourced from Zawya.com)