One of the core features of Dubai’s banking system is self-reliance. In what is generally a well-capitalised part of the world, lenders have been able to minimise their participation in global lending markets, and have not historically experimented with unconventional foreign securities or worried about what would happen if international credit markets were to tighten. However, conditions are changing as Dubai, as well as the UAE as a whole, increasingly tests the waters of global markets, and becomes more integrated with the international financial system.

Sector Exposure 

Total foreign exposures – defined by the Central Bank of the UAE (CBU) as branches and exposures to foreign entities – reached Dh568bn ($154.6bn) by the end of 2014 (27% of total assets). Exposure to foreign banks specifically reached Dh147bn ($40bn). Greater interaction with the global system has not yet translated into greater risk, from the CBU’s perspective. The trend presents “limited financial stability concerns” because the risk is spread across several countries. The system-wide total of foreign exposures at the end of 2014 included 11 countries for which the amount exceeded Dh10bn ($2.7bn), with the UK topping the list at Dh55bn ($15bn). The US was second at Dh50bn ($13.6bn), and Qatar third at Dh44bn ($12bn).

These growing connections to the wider system are occurring in several areas. For instance, banks are increasingly looking to global debt markets as a funding source as lower oil prices mean regional customers have less excess cash in their savings accounts. Borrowing internationally has been ongoing since 2013, and overall, capital markets-based funding for banks makes up 10% of the system’s funding mix, according to the CBU’s “Financial Stability Report 2014”. UAE banks are also lenders in the global markets. In global securities markets, UAE banks held Dh91bn ($24.8bn) in investments, with 93% of those in debt securities. Countries in the OECD issued about 46% of the total.

Global connectivity is also increasing because banks have capital and are looking to spend it by expanding internationally. Existing operations in the UK, Egypt and the US accounted for more than half of total assets and lending outside the emirates. UAE banks have typically either looked to serve the wider region they are familiar with, or to enter markets that provide new opportunities within their overall strategies. Branches in the US were concerned with accessing global interbank markets, whereas in Qatar and Singapore, local credit opportunities were the focus.


Customer connections are expanding. “Domestic transactions can be done electronically and the mobile financial service in many countries around the world has been a great initiative and a success story in including unbanked consumers under the banking purview. We believe, and can foresee, that mobile wallets could be a new way for the industry to receive money from abroad and will provide great customer value and last-mile connectivity,” said Jean-Claude Farah, Western Union’s president for the Middle East and Africa, Asia Pacific, Eastern Europe and Commonwealth of Independent States.

There has been a steady stream of banks looking for opportunities abroad, including Mashreq Bank, which stated in October 2015 that it was evaluating opportunities in Turkey. Banking assets for sale in Turkey include HSBC’s operation, which the company had said it would consider selling in order to cut costs, and Finansbank, in which the National Bank of Greece owns a 60% stake. Africa has been another option for expansion, and lenders like Dubai Islamic Bank (DIB) have expanded there, but Abdul Aziz Al Ghurair, CEO of Mashreq and chairman of the UAE Banks Federation, said his company would stick to the GCC and MENA. In October 2015 DIB announced it had increased its stake in Indonesia’s Bank Panin Syariah to 40%, and also revealed that it was considering entering India, the UAE’s biggest trading partner.