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Banking on high standards.

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 time it was the members of the Beirut-based Arab Banking Union. The conference of the Beirut-based Arab Banking Union was important as "it concentrated on problems and obstacles that have recently faced the Arab banking sector and the ways it is hoped to avert them in the future," the ABU secretary-general, Adnan al Hindi stated. "It also focussed on the reasons that have prompted authorities in some Arab states to revise banking laws to boost their role after the failure of several banks due to the absence of such laws."

While central bankers in the region have been meeting to set their houses in order, Dubai has also been concentrating on the important topic of bank marketing. With its large number of foreign and local banks vying for part of the limited share of business, Dubai recently staged the first conference on "Successfully Marketing Financial Services in the Arabian Gulf." It was organised by the Pan Arab Research Centre (PARC) and covered a broad range of subjects. These included consumer banking strategies and product development; advertising and communications; market composition and the flow of funds; investments products and the high net worth client; together with Islamic considerations, service and regulatory issues.

Local bank branches display a much stronger element of service more evident than in some neighboring countries. In a region that traditionally sees large queues at tellers' windows, anything that reduces these is important. The increase in automated teller machines (ATMs) is a case in point. These are proliferating and the range of added-on services that they can provide grows constantly.

Citibank, for example, has developed a "service quality programme" over four years which has worldwide guidelines, but has been honed especially for the local market. The goal is problem-free service with no customer having to wait any longer than eight minutes. The importance of the "first line of contact" in banking is a recurring theme.

Financial services are becoming more sophisticated and the marketing of them more precise. Several banks target individual high net-worth clients, and have a firm indication of the size of this market, and what proportion of it is prepared to invest in the region. Mutual funds are another area which is seeing strong development, with investors seeking both regional portfolios as well as European and intercontinental funds.
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Title Annotation:Dubai as an international banking center
Author:Arnold, Stuart
Publication:The Middle East
Date:Jun 1, 1993
Previous Article:Continuity is the key.
Next Article:Victim of regulations.

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