DUBAI - A UAE government body overseeing the restructuring of two troubled Islamic mortgage lenders is mulling merging them into an Islamic bank and doubling their capital, a newspaper reported on Wednesday citing bankers.
The new entity will have a capital of 5 billion dirhams ($1.36 billion), doubling the 1.5 billion dirham capital of Tamweel and the one billion dirham capital of Amlak, Al-Khaleej said.
"The most recent scenario .... (would) stipulate approving the merger of the two firms and increasing their capital by establishing a new entity that takes the form of an Islamic bank after obtaining a licence from the central bank," it said.
It did not identify the bankers it cited.
The chief executive of Tamweel declined to comment when contacted by Reuters and the chief executive of Amlak and officials at the government body were not immediately available for comment.
The plan envisages the federal government and that of the emirate of Dubai to be partners in the new entity alongside lenders of Amlak and Tamweel, the newspaper said.
The scenario proposes that the federal government should guarantee the debt of the two firms and for settlement over a period that could extend to 10 years.
It cited sources as saying that the issues could be put for a vote by the firms' shareholders in November or December after approval by relevant government bodies.
A decision to merge both firms will happen only after the government unveils a plan to restructure them, Tamweel's chairman Sheikh Khaled Bin Zayed al-Nahyan said in May.
Officials have been saying since March that a decision on how to restructure them would be made soon.
The fate of a merger between the two Islamic finance companies has been under a review by a federal government committee since the UAE announced in November it would merge the firms with two other state-controlled banks.