Dubai sets great store by its reputation as a banking centre. It aims to be lean, fit and efficient in an increasingly sophisticated international environment. Stuart Arnold surveys the banking sector's attempts to provide the best possible service.
DUBAI HAS TRADITIONALLY been seen as the leading commercial and trading centre of the UAE. Consequently, it is understandable that the financial sector is playing an increasingly important role in aiding the growth of commerce by building on this infrastructure.
Since 1980, the regulatory authority has been the UAE Central Bank. Currently in Dubai itself there are almost 50 banks (both domestic and foreign) doing business, of which 27 are from overseas. However, federal law restricts them to no more than eight branches each.
In the increasingly sophisticated international atmosphere, particularly with services introduced by some of the larger banks such as Citibank, Barclays, ABN-AMRO and the British Bank of the Middle East, local methods and ways of doing business are changing fast.
The Bank of Credit and Commerce International (BCCI) scandal had a dampening effect throughout the UAE and there was much concern on how great the longer-term effects might be. This has had a salutary effect on the local banks, as well as other GCC countries. The governors of the region's central banks met in Abu Dhabi in April for the second time in under a year in an attempt to unify their monetary policies, align their individual currencies and to allow national banks to open branches in member states.
Sultan bin Nasser al Suweidi, the governor of the UAE Central Bank who chaired the meeting, confirmed that as the European Single Market takes shape GCC states are faced with increasing pressure to bring their financial institutions up to international standards. The Basel Committee's decision to classify some Arab banks as high-lending risks (partly based on the banks' capital adequacy levels) gives considerable cause for concern.
An early reaction came from the UAE, which has said that it will enforce a 10% capital adequacy ratio for banks with effect from the beginning of July rather than the customary 8%. A more radical plan under discussion is for GCC member countries to peg their currencies to a basket of currencies rather than the dollar, as is currently the practice everywhere except Kuwait.
A wider group of Arab bankers also met later in April in Muscat to address the issue of capital inadequacies. This...