Interview: Abdulaziz Al Ghurair
How would you evaluate central bank policies in regards to personal loans and their potential impact on the wider economy, and what else can be done to protect the financial system from defaults?
ABDULAZIZ AL GHURAIR: The policies of the central bank have been fairly prudent, and are required to ensure the health of retail banking in the country. I am a strong advocate of a free economy and adequate market discipline. Having said that, I also agree that regulators have to be vigilant and step in immediately if they feel the necessity or if the market players do not behave responsibly. The UAE Banks Federation (previously Emirates Banks Association), for instance, has set up technical committees to allow greater representation of banks. Such bodies focus on market discipline and report back to the central bank periodically to highlight key issues that need addressing. We expect that this will work well in self-disciplining the banks on prudential issues.
What measures and incentives can Dubai adopt to accelerate its ambition of becoming a global centre for business and finance?
AL GHURAIR: Dubai continues to strengthen its position as the leading regional and, increasingly, international centre for business. The emirate has taken great strides to diversify its economy and develop a robust and modern infrastructure that would attract international organisations looking to do business in our region.
Indeed, Dubai is home to several ambitious investment and development projects. Dubai International Finance Centre (DIFC), in particular, has been committed to encouraging economic growth and development in the region through its strong financial and business infrastructure. The client base of DIFC comprises about 900 active registered firms, including 17 of the world’s top 25 banks, eight of the world’s 10 largest insurers, eight leading law firms, half of the top 20 money managers and seven of the top 10 consultant companies. Further, around 13,000 employees currently operate in an open environment supported by international legal and regulatory standards. Companies attached to DIFC benefit from incentives such as 100% foreign ownership, 0% tax rate, and no restriction on capital convertibility or profit repatriation.
As Dubai positions itself centrally within the international financial arena, its soft and hard infrastructure needs to be in line with international standards. DIFC has successfully developed an architecture with a legal system based on English common law, a regulatory framework to match global financial services best practices and the largest international financial services cluster in the MENA and South Asia region.
Built on a foundation of a modern legal, regulatory and physical infrastructure, DIFC is a leading destination of choice for financial services firms seeking to establish a presence in the region.
As Dubai gears up for the next phase of growth, it is important to pursue standardisation and sharing of best practices between different zones and bodies. This process has nonetheless started through better institutionalisation of councils, notably the free zone council. DIFC continues to be a catalyst of UAE’s growth and a major contributor to the country’s stature as a leading location to do business.
To what extent can the banking sector support the development plans of the UAE and the emirate?
AL GHURAIR: The overall health of the UAE banking sector has steadily recovered from the dangers following the 2008 global financial crisis. Admittedly, there was a temporary stress in the system due to liquidity concerns and the sudden spike in credit losses. However, due to quick actions by the UAE government and the UAE central bank the situation stabilised quickly. Today, the national banking sector is very healthy; there is ample liquidity in the system, capital adequacy is high, provision for loan losses are declining, and non-performing loans are sufficiently reserved. With the banking sector expected to grow it is in a far stronger position to better support the UAE’s long-term development plans.
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