What’s new: UAE banks have agreed to halt criminal prosecutions for bounced cheques drawn by small and medium-sized customers. The plan which comes under effect immediately will allow debtors a 15-day period to agree to a restructuring scheme with creditors, followed by up to 90 days in which the banks will refrain from taking any pre-emptive action including prosecution in the courts or travel bans. The arrangement will apply to companies with minimum borrowing of AED50 million or more, or turnover of more than AED100 million. Debtors who are already subject to legal action can appeal under the new arrangements and seek a halt to legal proceedings, provided that they can show genuine commercial challenges and an intent to repay. The scheme has been agreed by the CEOs of all the UAE banks and approved by the central bank, according to UAE Banks Federation chairman Abdul Aziz Al Ghurair. A 75% majority acceptance by creditors is required to adopt the measures of the scheme, after which creditors will sign a “standstill agreement" on any further legal action against the debtor. Creditors must agree that there are “genuine commercial challenges which led to the request for restructuring. This plan has not yet been extended to personal banking however Mr Ghurair expects to have an update on this in a couple of months.   Our take: We believe this is an encouraging development and should help stemming the inflow of NPLs from the SME segment and aid in the recovery process. United Arab Bank, RAK Bank and UNB were some of the UAE banks where the stress from the SME and small business segments have been felt acutely. The fact that this programme does not yet extend to the personal banking segment, suggests that it would not alleviate the provisioning burden for RAK Bank as it has relatively high exposure to small business segment. We have a Neutral rating for RAK Bank and UNB as we believe provisioning pressure at these banks would continue to be elevated in the short term. (The National, Shabbir Malik, Murad Ansari)