UAE Central Bank mulls licences for more players

DUBAI - The Board of Directors of the UAE Central Bank is debating a number of key banking industry related issues ranging from the minimum capital requirements, the expansion of branch network by the AGCC banks and other foreign banks in the UAE and the issue of equally taxing all players in the banking industry.

By Babu Das Augustine

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Published: Tue 8 Jun 2004, 9:22 AM

Last updated: Thu 2 Apr 2015, 12:00 PM

As far as many of these issues are concerned, the Central Bank is moving towards best global practices. In an interview with Khaleej Times yesterday Sultan bin Nasser Al Suwaidi, the Governor of the UAE Central Bank discussed a host of issues concerning the banking industry including the impending changes.

KT: The issue of allowing more regional and foreign banks and letting the existing foreign banks to expand their branch network have been under consideration for some years, has there been any decision yet?

A: All three issues are being discussed by the Board of Directors of the Central Bank. In the first stage, the permission for AGCC banks to expand in the UAE will be granted under certain guidelines. Followed by this the issue branch expansion of existing foreign banks will be taken up. Prior to issuing of new licences to new foreign entrants, the regulations regarding branch expansion will be announced.

KT: Does the recent decision to treat the foreign banks at par with the local banks in terms of taxes on profits will mean an abolition of the existing taxes on foreign banks?

A: No, it only means that all banks operating in the country will pay the same rate of taxes, at whatever rate finalised by the Board of Directors. The discussions are currently on to decide on the appropriate levies to be charged on all banks.

KT: Is there any move to increase the minimum capital requirements of Dh40 million for banks in the UAE in the context of permiting more regional and global players ?

A: We will follow the international standards as a benchmark. We have been debating the issue at the Board level. International Monetary Fund (IMF) has been favouring lower capitalisation to allow more players. The Central Bank is determined to keep it at internationally acceptable levels while keeping to the requirements of the local banking industry.

KT: Has the changing composition of Central Bank reserves were necessitated by the market conditions especially in the international forex market and commodities market?

A: We follow the policy of trading the gold reserves (depending on the treasury requirements). As far as other reserves are concerned we are free to hold it in any currency of our choice. Currently, the bank holds a major portion of its reserves in dollars, however, the bank is free to change its composition depending on its perception of domestic and global economic conditions.

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