Travelogue

Essential Guide

BANKING SECTOR 

The growth of the Banking sector in UAE has been unique in comparison with any other sector in UAE,  and for that matter with any other country in the region.  Tight  control  by the UAE Central Bank over all financial institutions in Emirates, in order to ensure strict compliance to guidelines,  has resulted in making UAE the financial hub of the region. 

In addition to acting as the bank to the other banks operating in the country, The UAE Central Bank is the banker and financial advisor to the Government.  It is the responsibility of the Central Bank to formulate and implement the country's Banking, Credit and Monetary Policy in order to realize and achieve the Economic Policy objectives, including price stability, and to support the U.A.E. dirham, guaranteeing its value, stability and its free convertibility into all currencies.

Locally Incorporated and Foreign Banks:

Banks in the U.A.E. are divided into two major categories: locally incorporated banks and these are public shareholding companies licensed in accordance with provisions of Union Law No. (10) of 1980, and branches of foreign banks which have obtained Central Bank's licenses to operate in the country as per provisions of the said Law. Historically, national banks (with majority national shareholding) and foreign banks existed prior to the establishment of the former Currency Board and, hence, before the Central Bank was created and commenced its operations. Within such historical circumstances the number of banks and their branches in the country and abroad increased very rapidly on obvious disproportion with the capacity of the local market, hence, provoking the monetary authority at that time to withhold issuance of licenses to any new bank and set about reducing the number of branches of a foreign bank to a maximum of eight branches.

  By 31.12.2000, the number of national banks reached 20 with a total of 274 branches and 37 pay offices. The number of foreign banks, meanwhile, reached 26 banks with a total of 109 branches, including  one pay office.

Restricted License Bank

A restricted Licence Bank is a commercial bank which is not authorized to accept deposits from residents in Dirhams, but may receive deposits in foreign currencies. Such bank may also extend credit facilities to residents and non-residents. There is only one restricted license bank operating in the country at present, namely, Banca Commercial Italiana.

Investment Banks

Union Law No. (10) of 1980 defined investment bank as bank that does not accept deposits whose maturities are  less than two years, but may borrow from its head office, from local or foreign banks, or from financial markets. There are two investment banks operating in the UAE at present, namely:

1. United Arab Emirates Investment Bank (P.J.S.C).
2. HSBC Financial Services (Middle East) Limited.

Back to 'Business' Main Page