Monthly Insight: What is banking in the UAE really like?

What is banking in the UAE really like?

According to industry experts, all indicators for the UAE banking industry are positive and show that the industry is stable, profitable and mature. Moody’s financial analysts recently issued a research update that confirmed its view that the UAE banking system is “stable.” It cited banks’ strong capital positions, resilient profitability and solid funding.

Strong Banking Industry

This is good news for commercial, corporate and private banks operating across the UAE. Only a few years ago the sector experienced an important consolidation phase that strengthened surviving market players. Besides getting stronger, all major UAE banks have expanded their global footprint, opening branches or representation offices all over the GCC and in major cities including London, New York, Hong Kong and Singapore.

Local banks now dominate the commercial banking market. The two largest are First Abu Dhabi Bank (FAB), a byproduct of the 2016 merger of FGB and National Bank of Abu Dhabi, and Emirates NBD. The two banks have total assets of USD 199 billion and USD 136 billion, respectively; both have members of the ruling families of Abu Dhabi and Dubai as major shareholders. More recently, 2019 has started with the announcement of another merger between ADCB, UNB and Al Hilal Bank who together will create the third largest UAE bank. This signals both business confidence and financial stability.

It is no surprise that FAB and Emirates NBD have AA- and A+ Fitch ratings, placing them on par with the likes of HSBC and Standard Chartered, and above Barclays and the Royal Bank of Scotland (RBS).

Since the banks hold such a dominant position in the economy, there is an active regulatory authority supervising their activity. The UAE Central Bank, created in 1973, is responsible for overseeing all banks in the country. In addition, the Banking Supervision Department was established in 1978. It has developed into one of the most efficient regulatory bodies in the Middle East for banking oversight and customer protection.

The Dubai International Financial Centre (DIFC)

When you hear the term Free Zone you probably think of tax-free areas and 100% company ownership structures, but did you know that the DIFC is actually one of Dubai’s independent Free Zones and the leading financial hub for the Middle East, Africa and South Asia? It is home to a vibrant business ecosystem of over 23,000 professionals working for more than 2,000 active, registered firms.

If you are looking for Private Banking solutions, the DIFC hosts most Swiss and International private banks (including UBS, Credit Suisse, Julius Baer, Mirabaud and Pictet) and has years of experience supporting and serving HNW and UHNW individuals. One major benefit of the DIFC is that it is a Common Law and English language jurisdiction, with a court system largely modeled on the English Commercial Court. This ensures swift, independent judgments to settle local and international commercial or civil disputes.

On a similar note, the DIFC benefits from its own internal regulatory body, the Dubai Financial Services Authority (DFSA), which was inspired by the UK regulatory body, the FCA.

Services, Products and Technology

For both foreign and local banks you can expect to receive a high level of service comparable to that found in global financial centers. You will find the full range of banking products (deposits, savings, corporate accounts, loans, investment accounts) and access to all major financial capital markets. There is also a wide choice of online platforms that offer trading solutions in worldwide securities (such as equities, bonds, ETFs, and mutual funds) for both seasoned traders and beginner investors.

All banks in the UAE provide sophisticated online and mobile banking platforms which are accessible from anywhere in the world. All banking facilities are available in local and major international currencies, with no limits on international transactions. For those outside the UAE, an often-useful consideration is that banks here are open six days a week. This can be a lifesaver for urgent transactions or assistance you may need over the weekend.

When it comes to private banking, the DIFC offers all of the standard products found elsewhere in the world, and also provides clients with two additional layers of security related to disclosure of information and custody of funds. Banks in the DIFC cannot share client information with any offices outside the UAE (this is a DIFC rule for confidentiality) and most Swiss private banks keep custody of client funds in Switzerland. This provides clients with peace of mind as their personal information will not be shared outside the UAE and their funds are securely kept outside the UAE.

A New Age for Banking?

As the GCC’s strongest economy, the UAE has experienced an average GDP growth of 3.7% over the last seven years. A large portion of this rise can be attributed to the UAE’s firm commitment to embrace and adopt the latest technology. Likewise, the banking sector has undertaken its own ‘tech revolution’. What this means for consumers and business owners is a larger choice of banking products, enhanced cybersecurity, better connectivity, faster payments and transactions, and an easier and smoother account opening process.

A prime example of this is RAK Bank partnering with blockchain startup Ripple to enable instant cross-border payments for retail customers in India, the world’s largest remittance receiver. Late last year, NBAD followed suit, announcing that they would introduce cross-border payments on blockchain using Ripple.

The UAE has also been a strong proponent of adopting artificial intelligence, helping to improve everyday interactions with banks, for both customer service and asset allocation. Perhaps the most clear example of this is Emirates NBD’s chatbot, ‘Eva’, who helps customers access the information they need instantaneously. Likewise, robo-advisers such as ‘Sarwa’ provide round-the-clock financial planning assistance using an algorithm-based approach that requires little to no human supervision, making them significantly cheaper than traditional wealth managers.

We can expect many more announcements from the financial sector over the coming months as the UAE acts upon its Emirates Blockchain Strategy 2021, launched in April last year. Stay tuned.

As you can see, the UAE banking sector provides a secure, regulated environment for business and investors to operate in while also remaining at the forefront of innovation and change. I for one am looking forward to what new technologies, services, and financial products will be implemented this year and beyond.

What is your experience with banking in the UAE? Have you had a positive or negative experience with banking in the region? Any thoughts, comments or feedback are appreciated and welcome!

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