The UAE central bank has removed waivers given to foreign banks allowing them to use their group’s capital to calculate lending to the government and state owned companies. Foreign banks can only use the reserves of their locally-registered units to calculate lending limits. Large international banks should be unaffected by the move, as they register the loans made in the UAE in central processing centres outside the country. The change however is likely to impact many regional and Asian banks, which traditionally booked UAE business within local units and predominantly to government entities and large companies. Most local units are thinly capitalised so to keep the capital cost to the group to a minimum: under the 1980 UAE banking law, foreign banks must allocate capital funds to the local unit worth AED40 million (USD10.9 million). The 2012 circular on large exposure rules requires that the exposure to the government and government-linked companies of branches of foreign banks in the UAE must not exceed 30% of the local capital base. But the 2012 circular also said the central bank may give certain exemptions to the rules. For banks which received such waivers, these were not renewed as of December 31st. (Reuters)