Credit Extension Letter for United Arab Emirates

Credit Extension Letter Template for United Arab Emirates

A Credit Extension Letter is a formal document issued by a bank or financial institution in the United Arab Emirates, extending credit facilities to a borrower under the governance of UAE Federal Laws and Central Bank regulations. The document outlines the terms and conditions of the credit facility, including amount, tenure, interest rates, security requirements, and conditions precedent. It serves as a binding offer of credit extension, subject to UAE banking regulations and commercial laws, and requires formal acceptance by the borrower to become effective. The document must comply with both conventional banking practices and, where applicable, Islamic banking principles under UAE law.

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What is a Credit Extension Letter?

A Credit Extension Letter is utilized when a bank or financial institution in the UAE agrees to provide or extend credit facilities to a customer. It is commonly used for both new credit facilities and modifications to existing arrangements. The document must comply with UAE Federal Laws, particularly UAE Federal Law No. 14 of 2018 (Central Bank Law) and relevant Central Bank circulars. The letter typically includes specific credit terms, pricing, security requirements, conditions precedent, and compliance requirements. It serves as a formal offer of credit and, once accepted, forms a binding agreement between the bank and the borrower. The document needs to be structured to accommodate both conventional and Islamic banking principles, depending on the nature of the facility, and must align with UAE Central Bank's credit risk management guidelines.

What sections should be included in a Credit Extension Letter?

1. Letter Header: Bank's letterhead, date, reference number, and formal addressing to the recipient

2. Recipient Details: Full name and address of the borrower/customer

3. Subject Line: Clear indication that this is a Credit Extension Letter with reference to any existing facilities

4. Reference to Existing Relationship: Brief mention of current banking relationship and any existing credit facilities

5. Credit Facility Details: Specific details of the credit extension including amount, tenure, and purpose

6. Commercial Terms: Interest rate, fees, charges, and repayment terms

7. Conditions Precedent: Any conditions that must be met before the credit extension becomes effective

8. Security and Collateral: Details of any required security or continuation of existing security arrangements

9. Acceptance Mechanism: Instructions for accepting the offer and deadline for acceptance

10. Closing: Standard closing, bank signatory details, and space for authorized signatures

What sections are optional to include in a Credit Extension Letter?

1. Islamic Banking Compliance: Required when the credit facility needs to be Sharia-compliant

2. Related Party Acknowledgment: Required when the borrower is part of a larger group or has connected entities

3. Foreign Currency Provisions: Required when the credit facility involves foreign currency

4. Insurance Requirements: Required when specific insurance coverage must be maintained

5. Cross-Default Provisions: Required when the facility is linked to other banking facilities

6. Change in Circumstances: Optional section addressing potential market disruption or change in law

7. Anti-Money Laundering Statement: May be required for certain types of facilities or customers

What schedules should be included in a Credit Extension Letter?

1. Schedule 1 - Facility Terms Summary: Detailed breakdown of all financial terms and conditions

2. Schedule 2 - Fee Schedule: Comprehensive list of all applicable fees and charges

3. Schedule 3 - Security Details: Details of collateral, guarantees, or other security arrangements

4. Appendix A - Required Documents: List of documents required for acceptance and drawdown

5. Appendix B - Compliance Certificates: Templates for ongoing compliance certifications if required

6. Appendix C - Drawing Notice Form: Standard form for requesting drawdown under the facility

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions
Relevant Industries

Banking and Financial Services

Real Estate and Construction

Manufacturing and Industrial

Trading and Distribution

Retail

Healthcare

Hospitality and Tourism

Technology and Telecommunications

Energy and Utilities

Transportation and Logistics

Professional Services

Education

Relevant Teams

Legal

Finance

Treasury

Risk Management

Compliance

Corporate Banking

Credit Administration

Islamic Banking

Operations

Business Development

Account Management

Relevant Roles

Chief Financial Officer

Finance Director

Treasury Manager

Credit Manager

Relationship Manager

Legal Counsel

Compliance Officer

Risk Manager

Managing Director

Chief Executive Officer

Financial Controller

Credit Analyst

Corporate Banking Officer

Islamic Banking Specialist

Business Development Manager

Account Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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