UAE commercial banking involves a vocabulary that spans financial instruments, regulatory frameworks, banking products, and international trade. This comprehensive glossary covers the terms you are most likely to encounter in your banking relationships, financing discussions, and trade finance transactions — defined in plain, practical language.
Trade Finance Terms
LC (Letter of Credit): A conditional bank guarantee of payment to a seller, released upon presentation of compliant shipping documents. Sight LC: Payment made immediately upon presentation of compliant documents. Usance LC: Payment deferred to a future date. BL (Bill of Lading): The shipping document that evidences receipt of goods by the carrier — a critical document in most LC transactions.
Packing Credit: Pre-shipment finance against a confirmed export order or LC. Forfaiting: Purchase of export receivables on a without-recourse basis at a discount — the forfaiter assumes all payment risk. Documentary Collection: The bank presents documents to the buyer in exchange for payment or acceptance.
Working Capital and Lending Terms
CAF (Current Account Facility): A business overdraft — a pre-approved credit limit on a current account. RCF (Revolving Credit Facility): A credit facility that can be drawn, repaid, and redrawn multiple times up to the agreed limit. Term Loan: A fixed-amount loan repaid in scheduled instalments over a defined period.
DSCR (Debt Service Coverage Ratio): Net operating income divided by total debt service — a measure of a business's ability to service its debt. A ratio of 1.25 or above is typically required by UAE lenders.
Risk and Compliance Terms
PEP (Politically Exposed Person): An individual who holds or has held a prominent public function, including their family members and close associates. Banks apply enhanced due diligence to PEPs. SAR/STR (Suspicious Activity Report / Suspicious Transaction Report): Reports filed by banks when a transaction is suspected of involving illicit activity.
FATF (Financial Action Task Force): The international body setting standards for anti-money laundering and counter-terrorism financing. UAE was removed from the FATF grey list in February 2024. OFAC (Office of Foreign Assets Control): The US Treasury agency responsible for administering US sanctions — relevant for UAE businesses with US dollar transactions.
Interest Rate and Pricing Terms
EIBOR (Emirates Interbank Offered Rate): The UAE interbank lending benchmark rate — the reference rate for most UAE floating-rate loans. SOFR (Secured Overnight Financing Rate): The US dollar alternative to LIBOR, increasingly used in USD-denominated trade finance in UAE. Spread / Margin: The percentage added to the benchmark rate to determine the total loan interest rate.
Arrangement Fee: An upfront fee charged by the bank for arranging a credit facility — typically 0.5-1.5% of the facility amount. Commitment Fee: A fee charged on the undrawn portion of a revolving credit facility. Gulf Oasis Commercial Brokers negotiates all fees on our clients' behalf to deliver the most competitive overall banking package.