#183 - April 2016 by CPI Financial

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APRIL 2016 | ISSUE 183

First lady Hana Al Rostamani

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Chairman of Dubai First

Egypt: an uphill battle

A promising market segment in the Gulf

Bank Audi aligns IT with business

Collaboration—the key to getting ahead

Dubai Technology and Media Free Zone Authority

“Understanding of the needs of each market segment, bespoke product oﬀering, and cautious ending, have ensured the successful performance of these products.”

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CONTENTS

APRIL 2016 | ISSUE 183

Editor’s Letter

News analysis The Saudi conundrum

News bites

THE MARKETS 10 A new day for Islamic finance in Iran 14 New insurance rules bodes well for Qatar LEGAL FOCUS 18 Banking regulation in the UAE—the delicate balance 22 Enforcing compensation rights in trying times COVER INTERVIEW 26 First lady COUNTRY FOCUS 30 Egypt: an uphill battle PRIVATE BANKING 34 A promising market segment in the Gulf

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FEBRUARY 2016

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MARCH 2016 | ISSUE 182

| ISSUE 181

MARCH 2016 | ISSUE 182

Nabilah Annuar

Editor

‘You had me at Abu Dhabi’

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Dubai Technology

Building a booming sector

Impact of IFRS 9 on banks across the Gulf

2016: a matter of check and balance

Investment banking strategies in hazy conditions

Digital payments—don’t get left behind

First lady

Zone Authority

Tirad Al Mahmoud

Chief Executive Oﬃcer of ADIB

and Media Free

OPEC outlook 2016: perspective energy exporters

Facing the ﬁntech disruption

“Understanding of the needs of each market segment, bespoke product oﬀering, and cautious ending, have ensured successful performan the ce of these products.”

“This is the Facebook generation so we want to be a Facebook bank for them.”

Dancing in the light

Hana Al Rosta

Chairman of Dubaimani First 30

Egypt: an uphill battle

A promising market segment in the Gulf

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Bank Audi aligns IT with business

and Media Free

after oil

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Dubai Technology

Saudi Arabia: life

Saudi Arabia: life after oil

Dubai Technology and Media Free Zone Authority

| ISSUE 181

Dancing in the light Tirad Al Mahmoud, Chief Executive Oﬃcer of ADIB

FEBRUARY 2016

s global markets begin to pick up in the second quarter, such excitement is also portrayed in this month’s issue of the magazine. Our bumper issue takes you on a journey exploring the latest developments across the region. Looking at issues affecting the banking and finance industry, we provide you an overview of the situation in Saudi Arabia, Iran, Qatar, UAE, Egypt and Bahrain. Synonymous with the Middle East, depressed oil prices have taken a toll on several countries including Saudi Arabia as it rolls out remedial measures to plug expected deficits. Iran stood firm on its decision not to limit oil production exports, in a move to revive the country’s economy. Following the attempted negotiations in Doha, OPEC members have agreed not to make any decisions until they have a full house. These challenging conditions have also inevitably affected the livelihood of many since last year as employees try to cut their losses through retrenchments and redundancy exercises (pg. 22). Moving on, an exclusive interview with Hana Al Rostamani, the Chairman of Dubai First, provides an insight on how the company tackles various segments of the market, recording double-digit growths and expanding its market share (pg. 26). There are two popular notions circulating amongst banks in the region—digitisation and customer centricity. The second half of the magazine largely depicts the importance of these values in various organisations. Some have purchased exclusive core banking systems, some hire third parties to assist in their digitisation endeavours, while some went to the extent of creating an in-house division dedicated to this cause. Indeed, the move towards a more techsavvy nation is a strong call amongst constituents in the Middle East. On the back of such enthusiasm in the market, challenging global macroeconomic conditions evidently do not pose a threat to the banking industry. Focusing on increasing their respective market shares through customer retention and attractive propositions, the industry seems to be standing on stable ground. As the market moves forward, rapidly changing in parallel with technological advancements, the region is one that refuses to be left behind. Engaging numerous concerns affecting the industry, I wish you a productive read.

Collaboration—the to getting ahead key

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CONTENTS

APRIL 2016 | ISSUE 183

AWARDS 40 UAE product awards CASE STUDY 52 Bank Audi aligns IT with business

IN DEPTH 56 Collaboration—the key to getting ahead 60 Securing payment transactions 64 Bank satisfaction on the rise 68 Challenges heading to 2020 TECH FOCUS 72 ‘Smart’ banking—the way forward 76 Perfecting Islamic banking

CYBERCRIME 80 Catching a cyberthief 84 Economic crime—an ongoing concern in the Gulf

McKenzie Habib Al Mulla

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Caring for your career

Looking for a new position in financial services in the Middle East?

Checkt CPI Financial’s Jobs page

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EDITORIAL editorial@cpifinancial.net

ADVERTISING sales@cpifinancial.net

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LAST WORD 90 Jon Conner, Middle East Market Manager,

Chairman SALEH AL AKRABI Chief Executive Officer ROBIN AMLÔT robin@cpifinancial.net Tel: +971 4 391 4681

software solutions

PERSONALITY 88 Mazen Boustany, Partner at Baker &

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NEWS ANALYSIS

The Saudi conundrum Kingdom implements countermeasures to weather the storm

audi Arabia’s money supply has (M3) witnessed a decline since September 2015, according to data from the Saudi Arabian Monetary Agency. Industry constituents have taken this as a sign of a slowdown in the country’s economy. In light of such challenging macroeconomic conditions, analysts believe that Saudi banks face heightened economic and industry risks and weaker credit conditions. A recent report by Standard & Poor’s Ratings Services (S&P) found that the drop in oil prices has had a marked and lasting impact on Saudi Arabia’s fiscal and economic indicators, resulting in difficult operating conditions for the banking sector. Due to the limited business sector diversification in the country’s economy and the small number of large corporations, Saudi banks are exposed to structurally high concentration risk. S&P expects credit conditions for Saudi banks to deteriorate through a correction cycle, leading to increased nonperforming loans and credit losses, as well as a decline in profitability. Consequentially, economic risks have increased for banks based in Saudi Arabia. The rating agency was also of the opinion that industry risks for Saudi banks have also increased, as banks will have a lower capacity to generate earnings to cover risks at a time when they will continue to support infrastructure projects and the real estate sector, which could be affected by the current difficult

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operating environment. S&P now views the trends for both economic and industry risks for Saudi banks as stable, versus negative previously. Its assessment of the stable trend in economic risks includes their expectation of a decline in lending opportunities and higher risks in some sectors, such as construction. Nevertheless, the impact on Saudi banks is still seen as manageable due to their high loan-loss reserves and strong capitalisation. In regards to the stable trend in industry risks, S&P continues to view the Saudi banking system as concentrated and subject to strong regulation and supervision. Although the firm projected a gradual slowdown in deposit formation

due to low oil prices, banks’ funding profiles are not likely to fundamentally change, as they continue to benefit from a low-cost domestic deposit base with limited reliance on external debt. In combating the repercussions of low oil prices, the largest oil exporting country in the world has approved 133 recommendations on improving the competitiveness of the Kingdom’s economy, which will be announced within the next six months. Following its announcement three months ago, the National Transformation Plan (NTP) will implement numerous reforms to the economy to help it weather the impact of lower oil prices and diversify away from reliance on hydrocarbon revenues. Local industry reports have stated that the NTP is being overseen by the Council of Economic and Development Affairs (CEDA), headed by Deputy Crown Prince Mohammad Bin Salman, and is expected to implement changes including privatisations of state assets and reductions of state subsidies when formally announced in the coming weeks. In a bid to improve business competitiveness in the Kingdom, Saudi Arabia is projecting an economic growth of approximately two per cent in 2016.

S&P has lowered their long-term counterparty credit ratings on five banks:

 Al Rajhi Bank to ‘BBB+/Stable/A-2’ from ‘A-/Watch Neg/A-2’,  The National Commercial Bank to ‘BBB+/Stable/A-2’ from ‘A-/Watch Neg/A-2’,  Riyad Bank to ‘BBB+/Stable/A-2’ from ‘A-/Watch Neg/A-2’,  Samba Financial Group to ‘BBB+/Stable/A-2’ from ‘A-/Watch Neg/A-2’, and  The Saudi British Bank to ‘BBB+/Stable/A-2’ from ‘A-/Negative/A-2’.

S&P has affirmed their long- and short-term counterparty credit ratings on three banks:

 Arab National Bank at ‘BBB+/Stable/A-2’,  Banque Saudi Fransi at ‘BBB+/Stable/A-2’, and  The Saudi Investment Bank at ‘BBB/Stable/A-2’.

(Photocredit: Nico Traut/Shutterstock.com)

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NEWS BITES

QInvest acquires ERGO Portfoy, launches new entity

atari Shari’ah-compliant investment group QInvest has successfully acquired 100 per cent of ERGO Portfoy, one of the largest and fastest growing asset management companies in Turkey. ERGO Portfoy has been rebranded as QInvest Portfoy and is a subsidiary of Qatar’s QInvest. Following the completion of this acquisition, QInvest Asset Management will have assets under management close to $1 billion across its global platform. The senior management of QInvest Portfoy will remain with the firm and will continue to operate from Istanbul. The company has been granted its licence to operate by The Capital Markets Board of Turkey and is licenced to offer portfolio management to both individual and institutional investors.

RATINGS REVIEW Entity

LT IDR/LT Rtg (FC)

Kuwait

Saudi Arabia

Qatar

Abu Dhabi

Qatar Israel

United Arab Emirates

Bahrain

BBB-

Turkey

BBB-

Cyprus

B+

Lebanon

Egypt

Iraq

BOUTLOOK

United Arab Emirates

Ras Al Khaimah

Under Review

Kuwait

Saudi Arabia

Israel

Country

WATCH

KEY

Positive Negative Evolving Stable

DGCX strengthens ties with Chinese counterparts

he Dubai Gold & Commodities Exchange (DGCX) has made joint collaborative efforts with Industrial and Commercial Bank of China Limited (ICBC) and the Agricultural Bank of China (ABC)-DIFC Branch. The partnership with ICBC paves way for both institutions to collaborate in areas of product development and on the potential provision of high quality banking services to support crossborder derivatives business in the Middle East and Asia. It also explores the possibility of ICBC becoming a settlement bank with the clearinghouse of the Exchange, DCCC. Such a move would facilitate the bank’s access to DGCX’s products and services, and eventually support clearing of RMB products. DGCX’s collaboration with ABC on the other hand, aims to facilitate trade flows in the precious metals and commodities between China and the Middle East. It focuses on areas of product development, strategy and exchange related market intelligence.

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Bank Du Caire to float IPO

n a recent announcement by the governor of the Central Bank of Egypt, the regulator announced plans to float a 20 per cent stake in Government-owned Banque du Caire (B3 stable, caa11) through an initial public offering (IPO). The planned listing on the Egyptian Exchange is credit positive, said Moody’s. This is because the IPO is expected to increase the bank’s low capital buffers, improve its market access for raising more equity and debt, and increase reporting transparency and timeliness, an issue for Government-owned Egyptian banks. A stock exchange listing makes it easier for Banque du Caire to tap the market again in the future—for either equity or debt—because the bank will be familiar to investors.

Dubai Islamic Bank floats $500 million Sukuk Dubai Islamic Bank (DIB) in April 2016 auctioned a five year Sukuk paper worth $500 million. First in the GCC to tap the Sukuk market after almost a five-month hiatus, DIB’s paper reopened the market, receiving substantial appetite from global investors. The offering was significantly oversubscribed (2.4x) attracting more than $1.2 billion in demand from 87 varied and high quality investors with a well-diversified geographical distribution comprising 62 per cent from the MENA region, 20 per cent from UK and Europe, and 18 per cent from Asia. The substantial investor interest allowed DIB to tighten pricing from initial price thoughts of 5Y MS+245bps to +230bps. The transaction is being hailed as a tremendous accomplishment in the current environment where the GCC has gone through a well-documented change in onshore liquidity conditions and witnessed multiple rating downgrades, which have been mainly the result of the drop in oil prices.

IOSCO updates requirements for OTC derivatives The International organisation of Securities Commissions (IOSCO) this month released an update of its information repository for central clearing requirements for OTC derivatives, which provides regulators and market participants with consolidated information on the clearing requirements of different jurisdictions. The repository sets out central clearing requirements on a productby-product level, and any exemptions from them.

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New markets entering the Sukuk space, says IIFM The International Islamic Financial Market (IIFM), in the fifth edition of its Sukuk Report, found that global Sukuk issuance of $61 billion in 2015 reflects a decline in issuance volume from 2014 due to the strategic move by Malaysia to stop issuing short-term investment Sukuk. The report also stated that currently 84 per cent of the $321 billion outstanding Sukuk belong to just three key markets—Malaysia, Saudi Arabia and the UAE. The IIFM research analysts note that this is likely to change gradually as markets such as Indonesia, Turkey, Pakistan and others become more active. A positive trend which has emerged from the research is the steady growth in sovereign, quasi-sovereign and corporate Sukuk issuances and given the continued interest in Islamic finance from new jurisdictions; the outlook for Sukuk in the medium to long term is positive.

GCC banks faced slower growth rate in 2015 due to lower oil prices

recent study conducted by The Boston Consulting Group (BCG) has found that in 2015, GCC banking revenues only grew by 7.2 per cent, down three percentage points from 2014. BCG has attributed this decline to depressed oil prices is believed to have reached the banking industry—affecting some banks more than others. Despite this, it was found that profits rose by 6.3 per cent compared to a 14.7 per cent in 2014. Main customer segments—retail and corporate banking— grew as well, with 8.1 and 3.3 per cent growth rates, respectively, while extraordinary income declined by 21.5 per cent. According to BCG, Oman and UAE banks showed strongest growth in 2015. Omani banks led the pack in terms of growth numbers with 9.6 per cent in revenues and 10.5 per cent in profits. In parallel, UAE banks’ revenues grew by 8.1 per cent and Kuwaiti banks recorded an 11.4 per cent profit growth. The spread of revenue and profit growth rates between the GCC countries was significantly smaller than that of last year, ranging from four to 11 per cent. There was no negative growth on a country level.

M&A slows down in first quarter of 2016 Off to a slow start, mergers and acquisitions (M&A) across the MENA region has shown a laggard growth. According to a report by Bureau van Dijk, compared with fourth quarter of 2015, value has declined against a slight increase in volume, quoting numbers produced by Zephyr. In total, approximately $6.998 million was invested across 163 deals in the first quarter (Q1) of the year, compared to the 161 deals worth $10.238 million announced in the final quarter of 2015. Nevertheless, despite the fairly low aggregate value figure, the result compares more favourably with the same period in previous years. In the first three months of 2015, it was found that $5.997 million was invested in the region, while during the corresponding period in 2014 the figure was $4.529 million. According to the report, volume also compares well (Q1 2014: 121 deals; Q1 2015: 148 deals). Taking this into account, the decline in value from the final quarter of 2015 can be seen less as a sign of things to come and more as a symptom of the traditionally quiet start to the year. It was stated that many will be expecting to see an upturn in aggregate values throughout the rest of 2016.

Oman’s relaxation of required reserves criteria is a credit negative, says Moody’s The Central Bank of Oman recently eased the eligibility criteria of banks’ required reserves effective 1 April 2016. This relaxation of prerequisites includes unencumbered Oman Treasury bills, Government development bonds and Government Sukuk up to a maximum two per cent of deposits. The authorities left the total reserve requirement unchanged at five per cent of deposits. Moody’s in a statement opined that the change is credit negative for Omani banks as it will negatively affect the country’s asset quality and solvency. According to the ratings agency, measure is designed to incentivise banks to replace cash reserves with Government securities and to redeploy the freed up cash by purchasing more Government securities and/or increasing private lending. Although an increase in Government securities would normally result in an increase in the banks’ liquidity cushion, this push is said to be occurring at a time when the credit quality of the Omani Government (currently rated A3 but on review for downgrade) may weaken.

Islamic finance to contribute to UN’s 2030 sustainability development agenda The UN General Assembly, in September 2015, adopted its 2030 agenda for sustainable development. The agenda comprised 17 sustainable development goals (SDGs) and 169 measurable targets centred on five pillars: people, planet, prosperity, peace, and partnership. Standard & Poor’s Ratings Services (S&P) in a recent report found that Islamic finance could aid modestly in achieving these SDGs. The UN last year stressed that striving for sustainable development will require a revitalised global partnership between all stakeholders. S&P opined that Islamic finance could play a role—a modest one at least—in meeting some of the SDGs, particularly those that are in line with the core principles of Islamic finance. Some Sukuk issues by global multilateral lending institutions over the past few years illustrate this point, although their overall amount remains small compared with multilateral lending institutions’ conventional debt issuance. Still, Islamic finance will likely remain a modest contributor due to the industry’s small size and the issues it has yet to resolve to unlock its global potential. Several justifications were pointed out by the research and rating agency. First was because Islamic finance principles and products are compatible with some of the UN’s SDGs. These are, for example, the concept of Riba, Qard Hassan, Waqf, and Zakat. Second is the expectation of global multilateral lending institutions opting to increase their use of Islamic finance due to the similarities in principles aforementioned to the SDGs. Third is the assessment that Islamic finance’s contribution to financing some SDGs will remain modest because of the industry’s small size compared to the overall financial system. Assuming the industry continues its efforts to improve standardisation and reduce the usual timeframe for issuing Sukuk, S&P stated that Islamic finance could attract new issuers such as multilateral lending institutions or governments that might see the industry as a way to diversify their investors’ base and fund their SDG agendas.

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THE MARKETS

A new day for Islamic finance in Iran Islamic finance in Iran will benefit from inward investment. (Photocredit: Borna_Mirahmadian/Shutterstock.com)

With sanctions eased, Shari’ah-compliant banks stand to benefit hugely, writes Azadeh Meskarian, Solicitor at Zaiwalla & Co.

ran is one of the pioneers of Islamic finance and its history of Islamic finance goes back to 1983. Following the Islamic revolution, Iran passed regulation forcing its entire banking system to rebuild into an Islamic one. More than 30 years on, the Iranian banking industry remains completely regulated by Shari’ah and is by far the world’s largest centre of Islamic banking.

10 page 10-12 the markets.indd 10

An often-ignored area within Islamic finance is the establishment of an inclusive national interest-free banking system in Iran. The core of Islamic finance around the world is associated with the ban on the payment of certain types of interest. Somehow in this case Iranian banks still effectively use interest-based transactions and retain the accounting standards of conventional banking.

THE SHADOW OF SANCTIONS

The international community became concerned that Iran was allegedly pursuing the establishment of a nuclear weapon. These suspicions continued into the mid-1990s, when President Bill Clinton’s government imposed sanctions on foreign firms believed to be allowing a nuclear-arms programme. cont. on page 12

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THE MARKETS

cont. from page 10

In the early 2000s, indications of work on uranium enrichment renewed international concerns, spurring several rounds of sanctions from the UN, European Union, and US Government. These international sanctions have sought to block Iran’s access to nuclear-related materials and put an economic restriction on the Iranian government to compel it to end its uranium-enrichment programme. Over the last few years Iran’s economy was weakened by the

POST-SANCTIONS GROWTH FOR ISLAMIC FINANCE

The lifting of sanctions has not only enhanced Iran’s economy but has also provided an opportunity for Shari’ah-compliant investment with diversification opportunities. There is a particular demand that Iran’s growing economy accommodates investment that will bolster its strength beyond dependence on oil. For Iran—one of the largest players in the Islamic finance industry

Foreign investors were left with the choice of either closing down or significantly reducing their activities. Unmistakably these prohibitions made it impossible for Iranian banks and their foreign subsidiaries to carry out transactions with the rest of the world while European banks with representatives operating there, again, had to close up or reduce their activities. - Azadeh Meskarian

imposition of sanctions by the US and EU, amongst other countries, on its financial, banking and energy sectors. It will take time for Iran to recover from the knock-on effects of these sanctions, which led to a dramatic fall of the Iranian rial and unexpectedly high inflation. Poor exchange rates seriously affected the lives of local Iranians, foreign companies and individuals with an interest in investing in the country. Foreign investors were left with the choice of either closing down or significantly reducing their activities. These prohibitions made it impossible for Iranian banks and their foreign subsidiaries to carry out transactions with the rest of the world while European banks with representatives operating there, again, had to close up or reduce their activities.

12 page 10-12 the markets.indd 12

contributing to around 40 per cent of global Islamic banking assets—the lifting of sanctions has only helped boost Islamic finance. The lifting of sanctions have also restored Iran’s access to the global financial markets. Under this scenario, Iran’s GDP growth would hover around six per cent annually in fiscals 2017 and 2018 according to market estimates, compared with less than one per cent in 2015. Iran’s Islamic banking assets are $482 billion, according to Dubai Government data from 2014. That’s more than in Saudi Arabia, Malaysia and the United Islamic Arab Emirates combined. Finance in Iran can benefit from the sheer volume of the post-sanction investments and such projects are reportedly high. This will in turn support the market growth and create growth opportunities for the banking system in Iran.

About Zaiwalla & Co Solicitors

Zaiwalla and Co. Solicitors is an international law firm based in Chancery Lane, City of London, with expertise in sanctions, arbitration, litigation and mediation. The firm acts for both domestic and overseas clients including corporations and state entities, as well as individuals. Their practise covers both contentious and non-contentious law, including domestic and international litigation, international commercial arbitration, shipping, banking, project finance, energy, company commercial and immigration. Founded in 1982 by Sarosh Zaiwalla, the first Asian individual to establish a law firm in the City of London, Zaiwalla and Co. Solicitors has been involved in over 1,200 international litigations and arbitrations in the fields of Energy, Maritime and Construction. Previous clients of the firm range from the President of India, the Government of the People’s Republic of China (PRC) and the Iranian Government to the Bachchan and Gandhi families in India. Zaiwalla & Co. Solicitors benefits from the expertise of a strong international team, including specialists in the laws of Russia & CIS, China, India, Middle East and Iran.

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THE MARKETS

New insurance rules bode well for Qatar Mohammed Ali Londe, Assistant Vice President – Analyst, at Moody’s, provides an assessment of the Qatar market.

n 30 March, Sheikh Abdullah bin Saud Al Thani, the governor of the Qatar Central Bank (QCB), issued operating instructions and governance principals for insurers operating in Qatar. These instructions, which relate to licensing, regulations and controls, risk management, accounting and actuaries reports, are credit positive for Qatar’s insurers because they will strengthen several credit characteristics, including capital, asset quality and reserve adequacy. The instructions include prudential requirements and took effect in April.

Insurers that will benefit from the new law include the largest Qatari insurance groups: Damaan Islamic Insurance Company (financial strength Baa2 stable), Qatar Insurance Company (unrated), Qatar General Insurance & Reinsurance Company (unrated), Doha Insurance Company (unrated), Al Khaleej Takaful Group (unrated) and Qatar Islamic Insurance Company (unrated). The QCB’s instructions aim to ensure the stability and sustainability of the insurance industry by improving the solvency of the 31 insurance companies operating in Qatar (17 of which operate in the offshore-

Mohammed Ali Londe

cont. on page 16

cont. on page 12

Insurance market in Qatar estimated to have grown 25 per cent in 2015.

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(Photocredit: BPhilip Lange/Shutterstock.com)

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THE MARKETS

cont. from page 14

domiciled Qatar Financial Centre). Qatar is the third-largest and one of the fastest growing insurance markets in the Gulf Cooperation Council, expanding at a compound annual growth rate of 21 per cent over the past 10 years, and we estimate that the insurance market grew at 25 per cent in 2015, with the top six insurers achieving growth of 28 per cent in 2015 in their Qatari operations. The new law stipulates that listed insurance companies must have capital greater than QAR100 million or their risk-based capital requirement, while unlisted insurance companies must have capital higher than the figure set by the QCB or their risk-based capital requirement. The risk-based capital is the company-specific minimum capital and solvency capital requirement that incorporates an economic view of the risks borne by insurers, including underwriting, market, liquidity, credit and operational risk.

Qatar insurance market expanded at a CAGR of

in the past 10 years

These enhanced regulations and implied additional costs of monitoring, managing and reporting may also encourage consolidation among some smaller insurers, potentially reducing competitive pressures and aiding market stability.

- Mohammed Ali Londe

The instructions also set out specific requirements on investments, changes that we expect will improve insurers’ asset quality. They include new limits on risky asset classes and concentration risk. We consider asset quality to be the key credit weakness for many Gulf Cooperation Council insurers and these steps are a positive development. We also expect that a requirement for actuarial-led reserve-setting, monitoring and reporting will enhance reserve adequacy and improve underwriting profitability by encouraging insurers to set premiums in line with underwriting risks and become increasingly selective about the risks they underwrite. These enhanced regulations and implied additional costs of monitoring, managing and reporting may also encourage consolidation among some INSURANCE smaller insurers, potentially reducing competitive pressures and aiding market stability.

Qatar’s Top Six Insurers by Gross Premiums Written, $ Millions

Qatar’s Top Six Insurers by Gross Premiums Written, $ Millions Gross Premiums Written

Total Assets

2012

2013

2014

2015

Compound Annual Growth Rate, 2012-15

$338

$362

$372

$622

22.5%

$2,039

$1,989

$2,552

Qatar Gen. Ins. & Reins. Co.

137

209

237

236

19.7%

1,952

2,346

2,582

Doha Insurance Co.

129

142

146

136

1.8%

362

461

422

Al Khaleej Takaful Group

6.9%

301

298

293

Damaan Islamic Insurance Co.

25.7%

205

226

247

Qatar Islamic Insurance Co.

12.4%

203

211

224

$779

$907

$976

$1,251

17.1%

$5,061

$5,533

$6,319

Qatar Insurance Co.

Total

2013

2014

2015

Note: Information based on the Qatar operations of the top six national insurers whose information is publicly available. Source: Moody’s Investors Service, on company Source: Moody’s Investors Service, basedbased on company data data

The new law stipulates that listed insurance companies must have capital greater than QAR100 million or their risk-based capital (RBC) requirement, while unlisted insurance companies must have capital higher set by the QCB or their RBC requirement. The RBC is the company-specific minimum capital 16 than the figure www.bankerme.com and solvency capital requirement that incorporates an economic view of the risks borne by insurers, including underwriting, market, liquidity, credit and operational risk.

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LEGAL FOCUS

(Photocredit: ppart/Shutterstock.com)

Banking regulation in the UAE – the delicate balance Tien Tai, Partner specialising in banking and finance at Holman Fenwick Willam, paints a picture of how new regulations effect the country’s banking system

Tien Tai, Partner specialising in banking and finance at Holman Fenwick Willam

18 page 18-20 Legal Focus.indd 18

ince the recent global financial crisis, regulators around the world have gone back to the drawing board and produced new legislation and regulation aimed at bolstering the banks and financial markets in which they operate, increasing the regulatory capital held by banks and financial institutions and calling for transparency in financial products. The Central Bank of the UAE is no exception. Its mission statement is to achieve a ‘sound banking sector’ in the United Arab Emirates. Following the credit crunch, the Central Bank has commenced a study on other banking markets and at international standards. Some of the new regulations since then have been developed in response to very specific, local concerns and circumstances. A significant portion of the new regulations arises out of global or regional initiatives, drafted in response to the conclusion that risk in the financial markets is best managed in a coordinated and consistent manner. An example of the reforms is the recent initiative to categorise all loans similar to international standards with a view to

provide a truly realistic position of banks and other financial institutions in the UAE by using a method to evaluate loans using standards promoted by the Basel Committee and international best practise. The regulations provide that UAE banks must make monthly reports to the Central Bank on their loan provisions, overdue or rescheduled loans. UAE banks will also have to make an accounting provision for personal loans which are in arrears of 90, 120 and 180 days, of at least 25 per cent, 50 per cent and 100 per cent of the loan, respectively. This applies to personal loans, car loans, credit cards and residential mortgages (unless collateral is provided by the customer which exceeds the loan amount). Clearly, it is prudent to require financial institutions to monitor their lending, the collateral they are holding and the provisions for their loans. We have seen banks maintaining close touch with their customers and this together with the regular testing of financial covenants, should give them forward visibility to spot any adverse changes to their customer’s financial health. cont. on page 20

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exploring

a new world of possibilities

Global Investment Bank Limited (GIBL) is a company limited by shares incorporated in the Dubai Internaaonal Financial Centre (DIFC) and is regulated by the Dubai Financial Services Authority (DFSA). GIBL only provides services to Professional Clients and Market Counter-Parres d as deďŹ ned by the DFSA.

w w w. g i b l . a e

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LEGAL FOCUS

cont. from page 18

In May 2015, the Central Bank also announced that following a consultation period and reviewing international best practises in liquidity risk management, it would be issuing regulations to control and monitor liquidity in UAE banks. The objective is to ensure that liquidity risks are well managed and in line with international standards (refer to box). Such initiatives could result in safer, more stable global financial markets, but it is likely that these stringent regulations add to the complexity and the cost of doing business. One of the consequences of the new legislation is that it may become more difficult for corporates to obtain funding directly from banks in the UAE, a comment which we hear from clients on a regular basis. While the new legislation is being developed and refined, some banks may adopt a wait-and-see approach so that they can better understand the impact of the legislative developments on the bank’s capital requirements and its cost of funding. Some UAE banks already face continued challenges in terms of profits, lending capacity as well as defending their market share. In addition, the increase in regulation, including increased reporting and due diligence requirements, as well as more onerous requirements to hold expensive capital against certain types of funding is likely to see banks charging higher margins on the money that they lend to clients as they seek to recover or offset the increased costs of doing business. As banks are required by regulators to undertake increased due diligence and KYC (know your customer) checks in relation to new transactions, the lead-time for obtaining financing from a bank is also likely to increase. Given that they are highly-regulated, banks may not be permitted to lend the

20 page 18-20 Legal Focus.indd 20

While the new legislation is being developed and refined, some banks may adopt a wait-and-see approach so that they can better understand the impact of the legislative developments on the bank’s capital requirements and its cost of funding.

- Tien Tai, Partner specialising in banking and finance at Holman Fenwick Willam

required funds to corporates wishing to raise capital for their financing and expansion requirements. The new regulations are a welcome addition in the UAE’s efforts to maintain a sound banking sector, primarily to attract investment and to encourage businesses to create jobs in the UAE. It appears that some banks

are already qualified to apply the Basel III requirements now and as such, the Central Bank of the UAE is on the right track to achieve its mission to ‘maintain a sound banking sector, support the financial system and adopt an effective monetary policy which ensures economic growth, lower unemployment and lower inflation.’

LIQUIDITY RISK MANAGEMENT PROVISIONS UAE banks need to comply with a new risk management framework. This provides, among other things that:

1. Banks are responsible for managing their liquidity risk in a prudent manner using all available liquidity management tools at their disposal. 2. The bank’s Board of Directors bears ultimate responsibility for liquidity risk management within the bank. The bank’s Board should clearly articulate liquidity risk tolerance for the bank in line with the bank’s objectives, strategy and overall risk appetite. 3. A bank must conduct its own internal liquidity stress tests on a regular basis for a variety of institution specific and market wide stress scenarios (individually and in combination). The scenarios should be based on the individual bank specific circumstances and business model. 4. A bank should use its internal stress testing outcomes to proactively adjust its liquidity risk management strategies, policies and position and develop effective contingency funding plans. 5. The scenarios and results of the stress tests should be shared with the Board of Directors on a regular basis and the Central Bank upon request. 6. A bank must have a formal contingency funding plan that clearly sets out the strategies for addressing liquidity shortfalls in emergency situations. The plan should be shared with the Central Bank upon request. 7. A bank must maintain an adequate cushion of unencumbered, high quality liquid assets to be held as insurance against a range of liquidity stress scenarios. Source: Holman Fenwick William

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Enforcing compensation rights in trying times

(Photocredit: Zern Liew/Shutterstock.com)

LEGAL FOCUS

Ahmed Odeh, Legal Consultant at MIO Law Firm provides his views on unfair dismissal

he continual decline in global oil prices has undeniably affected many economies across the globe. Oil dependent countries must turn to other sectors of their market, while oil and gas companies all over the world have increasingly started letting go of their employees in bulk. In the GCC region public bodies in Kuwait are looking at laying off expat workers, while in the UAE, Emirates Islamic recently announced its move to retrench its staff to cut costs. In some instances these actions can amount to unfair dismissal. This can be harsh on both employers and employees. Disputes related to unfair dismissal can relate to salary, endof-service benefits, compensation for airline tickets and so on. We outline below a guide to how employees can enforce their labour rights in the UAE.

NEGOTIATE A SETTLEMENT

The best form of dispute resolution by far is direct negotiation. It’s cost effective and quick. But we understand that not all employers are eager to sit at a negotiating table so they may avoid using this method. For employees, it is always advisable to get in contact with the employer to negotiate a settlement. During the negotiations, do not threaten to sue the employer as

22 page 22-24 Legal Focus.indd 22

may cancel the employee’s visa and the employee will not be able to make a claim for any further financial dues in the future.

FILING A COMPLAINT WITH THE LABOUR DEPARTMENT

If negotiations fail, then an employee may submit a request to the relevant labour department depending on the Emirate he or she is employed in. The labour department will then summon the employer to a meeting with the employee to take whatever action necessary to amicably settle the dispute. This process takes about two weeks to complete. Ahmed Odeh

this will only make matters worse and likely reduce the effectiveness of the negotiation. Moreover, do not state that you have taken advice from a lawyer even though you may have done so as that will not help you make your case. Also, make sure you understand your rights beforehand and be precise about what it is you want. It must be noted that an employee must not under any circumstances sign anything prior to receiving a cheque for final settlement as agreed upon. If the employee does so, the employer

RECONCILIATION AND SETTLEMENT COMMITTEE

If an amicable settlement is not reached between the two parties, the employee will need to obtain a no objection certificate (NOC) from the labour department to refer the dispute from the reconciliation and settlement committee to the labour court. An application to the labour courts shall be accompanied with a memorandum detailing a summary of the dispute, the arguments of the two parties and the observations/ findings of the labour department. cont. on page 24

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Salary MAG 21x27 E .pdf

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LEGAL FOCUS

cont. from page 22

Moreover, a hearing will be set in which both parties will be summoned to present their respective arguments. This is a critical stage in the dispute claim. As matters turn legal, the employee may wish to retain the services of a labour disputes attorney to help draft a memorandum outlining the employee’s claim and the relief sought. Avoid using typing centres to draft the claim as they may not be able to protect your legal rights in the best or most effective way. Additionally, ensure all essential documents are in Arabic or legally translated into Arabic.

LABOUR COURTS

When the RSC transfers the case to the labour court, the court will set a date for a hearing for the claim and notify the two parties of the hearing. The court may summon a representative of the Labour Department to explain the contents of the notes submitted by it. The employer shall also be given the opportunity to provide his defence. The labour case may be appointed several hearings and it may take months until the courts deliver a final judgement on the case.

ENFORCEMENT OF THE LABOUR COURT JUDGEMENT

If the employee obtains a successful judgement from the labour courts for his or her rights, he or she can execute the judgement and obtain the amounts that have been awarded to him or her. The process of enforcing a labour dispute claim may take as little as one week or as long as several years. Hence, it is always best to resolve any labour disputes amicably between the parties. In every case, the employee must be certain to bring a claim for any entitlement due within one year from the date on which the settlement payment is due. The employee may lose his or her right to claim the entitlement if the period of one year has elapsed.

24 page 22-24 Legal Focus.indd 24

It is always best to resolve any labour disputes amicably between the parties.

- Ahmed Odeh, Legal Consultant at MIO Law Firm

Definition of unfair dismissal The UAE labour law, which governs the relationship between an employer and an employee, does not differentiate between arbitrary dismissal and unfair dismissal. The law states that “A worker may be deemed to have been arbitrarily dismissed if the cause for such termination has nothing to do with the work performed. Termination is considered arbitrary if the employee’s service has been terminated on these grounds: a reasonable complaint has been lodged by the employee to the competent and appropriate authorities, or a justifiable action has been brought by the employee against the employer.” An employee will be considered to be unfairly dismissed by a company if he/ she has been terminated without having breached his/her obligations towards a company. The UAE courts have held that termination due to redundancy is not a valid reason for termination and therefore is considered as unfair dismissal.

Types of compensation for unfair dismissal:  Notice period in lieu of termination—the employer must pay the employee compensation equal to the employee’s remuneration associated with the entire period of notice or with the time by which it was reduced.  Unutilised leave wage—if the employee has not taken his or her annual leave during the time of employment, then he or she is entitled to the leave (vacation) salary in lieu of the annual leave time as long as the accrued leave salary is not in excess of two years’ worth.  Unpaid wage—any unpaid wages is due upon termination.  End of service gratuity  Return airfare  Performance bonuses  Unfair dismissal compensation (limited contracts)—when the employment contract is of limited duration, the employee is entitled to compensation equivalent to the period extending to the end of the contract period or three months’ wage, whichever is less. However, if the contract states that the employee is entitled to more than three months of paid salary upon termination, then he or she shall be paid that amount.  Unfair dismissal compensation (unlimited contracts)—when the employment contract is for an unlimited period, compensation for unfair dismissal is granted up to a maximum of three months of total wages. If the employee has served less than a year, then no compensation shall be applied.  Others—the employer cannot charge any visa fees, agency fees, etc. as such costs that, by law, only the employer should bear. Source: MIO Law Firm

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COVER INTERVIEW

First lady Hana Al Rostamani, Chairman of Dubai First, explains the company’s strategic moves that has led to its stellar performance, as well as her vision for the near future

ow has Dubai First performed over 2015?

Dubai First has continued evolving its customer-focused strategy of enhanced relationships through top-notch service, customised solutions and careful cost control which reaffirmed the company’s superior performance in 2015. Customer assets have grown by 40 per cent in 2015 over 2014, and the customer base has increased by nine per cent. In terms of revenue, the company has recorded 26 per cent growth with a remarkable 48 per cent growth in net profit in the same year, when compared to 2014.

What products have you launched in the last 12 months and how have they performed?

In the past year, Dubai First product portfolio has evolved in line with our three year strategy. Recent developments encompass the addition of the Cashback Card and the BusinessFlex Card to the existing suite of credit cards, as well as the launch of new product lines including SME finance, collateral-free personal loans, and bancassurance. The Cashback Card, introduced in September 2015 offers one of the most generous cash back programmes in the market, while the BusinessFlex Card provides unmatched flexibility for unlimited business growth. The UAE is a trading and logistic hub in the region, where small and medium enterprises (SME) contribute 40 per cent of the country’s GDP. In November 2014, the company diversified to offer SME finance solutions catering to the needs of this niche group of micro-enterprises. During the same period, Dubai First has also launched collateral-free personal loans as well as bancassurance products.

Hana Al Rostamani

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Dubai First recorded

What are the growth segments for Dubai First?

Dubai First follows the emerging trend of targeting customers based on their income, lifestyle preferences, recreational habits and travelling patterns. While this growing affluent segment remains a key focus for Dubai First, we also look to making inroads into the microfinance space.

Dubai First saw

Consumer behaviour towards money management is changing; how will Dubai First evolve to match customer expectations?

growth in revenues for 2015

48%

growth in net profit for 2015 Targeted marketing campaigns and onsite activation events have helped launch these products and increase visibility among the targeted segments. Understanding of the needs of each market segment, bespoke product offering, and cautious lending, have ensured the successful performance of these products.

Has the operation of Al Etihad Credit Bureau helped in bringing transparency to the consumer debt market?

The credit bureau is bringing a transformational change in the consumer lending space. For years, customers have availed multiple cards and loans from several financial providers without disclosing the actual liabilities. The credit bureau is helping to ascertain the amount of debt an individual holds. This has become an effective tool in the credit underwriting process to check for over-leverage and address asset quality issues. In the long term, the transparency that the credit bureau brings will help lenders lower the pricing of products for customers with good standing who service their debts in a timely fashion.

One of our key focus areas will be to develop and further enhance products and services to cater to this fast growing customer need for instant gratification and gaining ground in technological advancement. - Hana Al Rostamani

Customers today are savvier when it comes to money management. They have a good understanding of product offerings, benefits and pricing thanks to the information available through the internet and product comparison websites. Furthermore, consumers have grown more cautious when it comes to borrowing and spending on credit cards. They are aware money management is the key to sound financial planning to achieve lifestyle goals more effectively. Dubai First will continue to enhance its product suite and service propositions to match customer expectations by simplifying processes, reducing turn-around-times, adding new products to offer superior customer experience to our customers based on feedback and technology innovations.

With the millennials expecting 24/7 access to financial decision-making and to the management of their finances, what does that mean for the company?

Millennials are often referred to as digital and mobile natives. The fact that millennials will be the largest client group towards the end of the decade, is driving the financial services providers to assess their business model as well as the way in which they interact with clients and embrace digital and mobile mind-sets. The payment landscape has already seen a substantial change in the past few years, with electronic payments marking triple-digit growth year-on- year. Technology advancements follow market trends to match the evolving behaviour of customers, who now use various digital platforms and devices for purchases. The system and product innovations are developed on two vectorsâ&#x20AC;&#x201D;increased payment security and enhanced customer experience. As early adopters of novel technologies, Dubai First offers new choices and enhanced convenience to our cardholders, while remaining conscious of the security aspect. Towards this, a few of our key focus initiatives include Chip & PINâ&#x20AC;&#x201D;a technology that has already proven to be successful in reducing fraud in other countries around the world; 3D Secureâ&#x20AC;&#x201D;a system that offers increased security while shopping online; and an innovative digital wallet solution that offers our customers an easier and faster online shopping experience. cont. overleaf

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COVER INTERVIEW

cont. from page 27

Do you see a problem with consumer education in the management of debt?

There are increasingly more and more consumer education initiatives in the UAE. Lenders have a key role to play to enlighten their clients and the society at large on debt management. With the introduction of the credit bureau, customers will soon become the driving force to demand clarity, transparency and detailed information that would make a tangible impact on how to avoid the debt trap on one hand, and how to accumulate wealth on the other. From our perspective customer education is an on-going process which we would like to believe will benefit both sides in the long term. At Dubai First, we consider such initiatives necessary to engage with our customers and, moreover, as our social responsibility.

How is Dubai First addressing cybersecurity concerns?

Dubai First takes cybersecurity on highest priority and continuously upgrades its systems to provide industry level

security assurance. At Dubai First, we have implemented preventive, detective and corrective controls. We are taking every possible step to identify security threats, be it internal or external. In addition to building internally robust defences to protect customer information, we also share best practises with customers to educate them on potential threats and also how they can manage their online activities to protect themselves. Recent cyberthreat reports have highlighted that the need of the hour is proactive threat mitigation and we take extra steps in that direction.

What are the untapped areas of opportunities that the company seeks to penetrate this year?

With increasing market opportunities Dubai First re-engineers and reinvests in its business position with the aim of improving its competitive advantage. The banking habits and financial service requirements change with evolving lifestyles and the transformative powers of technology. The emergence of alternate payment solutions has played an important role in the design

The companyâ&#x20AC;&#x2122;s customer base grew by nine per cent in 2015.

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Understanding of the needs of each market segment, bespoke product offering, and cautious lending, have ensured the successful performance of these products. - Hana Al Rostamani

and development of products and services. One of our key focus areas will be to develop and further enhance products and services to cater to this fast growing customer need for instant gratification and gaining ground in technological advancement.

How will this be reflected in your product mix— what new products and services would you expect to launch over the coming 12 months?

Dubai First stands apart with an impressive record of ‘firsts’ and continues to push boundaries to offer differentiated products and services. In addition to focusing on diversified revenue streams through the SME finance portfolio and bancassurance products, Dubai First remains committed to gaining ground in the payment solutions space well aligned with the initiatives of the UAE government for cashless transactions, the introduction of contactless technology and growing e-commerce.

About Dubai First Dubai First was established in 2007 and is one of the leading consumer finance companies in the UAE, specialising in liability, loans and credit card products. The company strategy is based on building sustainable long-term value through innovation in harnessing a genuine customer service experience. Since inception and with a strong, multi-cultural workforce of professionals, Dubai First sought out to develop a niche reputation in the consumer finance and credit cards sector. Fully operational out of Dubai, with branches in Abu Dhabi and Sharjah, Dubai First has managed to build a unique base of clients in the region. Dubai First is a wholly-owned subsidiary of First Gulf Bank (FGB). FGB has a shareholder equity of AED 34.1 billion as of 31 December 2014, making it one of the largest equity based Banks in the UAE. Apart from a wide local presence, FGB operates through branches in Singapore and Qatar, representative offices in India, Hong Kong, South Korea and the UK, and a subsidiary in Libya.

How has Dubai First evolved since the takeover by FGB in 2013?

Since the acquisition of the company by FGB, Dubai First has been seamlessly integrated with a smooth transition operating independently with the Group DNA. The company is focused on aligning with the strategic vision and meeting the goals, aspirations and objectives set by the shareholders and Board of Directors. The company has grown over the years with a strong, multi-cultural workforce of professionals, developing a unique base of customers in the region fully operational out of Dubai, with representative offices in Abu Dhabi and Sharjah. Over the next three years, Dubai First will emerge as one of the leading consumer finance companies in the region and develop sustainable long-term value for its stakeholders.

What is your vision for Dubai First over the next one-to-five years?

Dubai First, Sharjah branch.

The company is focused on aligning with the strategic vision and meeting the goals and aspirations set by the shareholders. Over the next three years, Dubai First will emerge as one of the leading consumer finance companies in the region and develop sustainable long-term value for its stakeholders.

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29 25/04/2016 16:55

COUNTRY FOCUS

Egypt: an uphill battle Egypt exercises countermeasures to stimulate its economy on the back of positive external financial support

STATUS QUO

olitically embattled since the Arab Revolution, Egypt may just start showing signs of improvement. The political transition in the country, which was initiated in June 2013, came to an end in December 2015 with the election of the House of Representatives. According to the World Bank, the Egyptian economy started to recover in 2014/15 as the government scaled up infrastructure

30 page 30-34 Country Report.indd 30

spending and undertook important measures to restore macroeconomic stability by moving away from universal subsidies towards a more targeted transfer programme, taking measures to contain the wage bill and increasing tax revenues. The International Monetary Fund (IMF) in its World Economic Outlook in April lowered its forecast for the world economy, predicting a global growth of 3.2 per cent in 2016 and 3.5 per cent in 2017. Declining to 4.2 per cent the

previous year, Egyptâ&#x20AC;&#x2122;s GDP growth is forecasted at 3.3 per cent in 2016. It is expected to rebound in 2017, reaching a growth of 4.3 per cent. Unemployment is expected to rise, reaching 13 per cent this year, compared to 12.9 in 2015. This however is expected to drop again to 12.4 per cent in 2017. Preliminary figures from the World Bank for the first quarter of 2015/16 indicate that the economic uptick has somewhat faded, mainly due to the foreign exchange

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(Photocredit: posztos/Shutterstock.com)

Egypt’s GDP growth forecast is

3.3% in 2016

shortages that stifled production, and undermined Egypt’s competitiveness. The Central Bank of Egypt therefore moved towards a more flexible exchange rate management regime mid-March 2016, in a bid to alleviate pressures on the external accounts and partially resolving a binding constraint on economic activity. The World Bank stated that financial soundness indicators point to the continued resilience of the banking sector, and the government is making efforts to deepen financial inclusion. Nevertheless, continued fiscal and economic reforms are needed to sustain growth. In terms of demographics, the country was also said to have made substantial improvement in human development indicators particularly child mortality, life expectancy, primary and secondary school enrolment, and literacy rates have improved dramatically in the past thirty years. Nevertheless, governance issues continue to affect health and learning outcomes.

FINANCIAL STABILITY

To create more liquidity in the country, the Central Bank of Egypt in March announced the launch of US dollar certificates for sale to Egyptian expatriates. The sale of these certificates is expected to increase the three government-owned banks’ (National Bank of Egypt, Banque Misr, and Banque

Egypt’s GDP expected to rebound in 2017, reaching a growth of

4.3

Du Caire) dollar funding, a credit positive because the banks’ dollar liquidity has tightened in recent quarters. Moody’s however foresees that the increase is insufficient to alleviate businesses’ foreign currency needs and covers less than one month of imports, so that banks’ foreign currency liquidity cushions will continue to decline. Called ‘Biladi’, the certificates are available to Egyptian expatriates and carry a fixed interest rate. A one-year certificate was intended at 3.5 per cent per year, a three-year certificate at 4.5 per cent and a five-year certificate at 5.5 per cent. Given these high returns, the products were expected to appeal to investors. “Nevertheless, the country is facing a severe shortage of dollars and the funds raised will not be enough to meet business demand. The World Bank estimates remittances in 2015 were around $20 billion, although only a small part is captured by the banking system because less than 10 per cent of the adult population has a bank account. Moreover, recipients of remittances in bank accounts usually withdraw these funds to benefit from better rates in the unofficial market. Even if, for example, 10 per cent were invested in the Biladi certificates, the banks would only raise around $2 billion, less than one month of imports,” stated a recent Moody’s report. cont. overleaf

World Bank to provide

$3billion loan to Egypt

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COUNTRY FOCUS

“Given the severe dollar shortage, we do not consider these banks’ increased dollar funding to be enough to offset the erosion of foreign-currency liquidity cushions. The banking system’s liquidity ratio [cash due from banks and liquid investments as a percentage of foreign assets] in foreign currency declined to 48.9 per cent as of September 2015 from 57.4 per cent in June 2014, but we estimate that the ratio is materially lower at around 27.5 per cent if we exclude the banks’ investments in foreign-currency Egyptian government bonds and treasury bills, which are usually renewed at their maturity,” it further elaborated.

CURRENCY DEVALUATION

Mid-march, the Central Bank of Egypt devalued the Egyptian pound by 14.4 per cent to EGP 8.85 to the US

Given the severe dollar shortage, we do not consider these banks’ increased dollar funding to be enough to offset the erosion of foreign-currency liquidity cushions. - Moody’s

dollar and decided to adopt a more flexible exchange rate regime. Moody’s, in a commentary, said that the CBE’s decision, which came at a time of low net international reserves, slowing growth and a widening difference between official and black market exchange rates, is credit positive for Egypt (B3 stable) because it brings the official exchange rate closer to market rates. The devaluation is expected to limit the need to spend foreign exchange reserves to support a higher currency value and is likely to boost exports and

Unemployment in Egypt is expected to rise 13 per cent in 2016.

32 page 30-34 Country Report.indd 32

foreign investment inflows. The positive results should outweigh the near-term negative effect from devaluationinduced inflation. At the same time, the devaluation will have a limited effect on the government’s debt stock or debt servicing costs owing to the low levels of foreign-currency-denominated debt. Due to a combination of slowing external donor support, a widening non-grant current account deficit and declining investment flows, Egypt has been experiencing strains on its external liquidity position.

(Photocredit: posztosMassimo Vernicesole

cont. from page 31

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The research and ratings agency anticipates that a weaker currency will likely to improve Egypt’s trade competitiveness. The combination of improving external dynamics and a better growth outlook should reduce balance of payments pressures which have resulted in the country’s net international reserves stagnating at around $16.5 billion.

EXTERNAL SUPPORT

Over the past few months, several parties have announced plans that would increase inward investments for the country. Pledging its support, Saudi Arabia has revealed plans to build a bridge linking the two countries and to finance the country’s petroleum needs for the next five years. The Kingdom’s plans also include developing the Sinai region, a triangular peninsula in Egypt, situated between the Mediterranean Sea to the north and the Red Sea to the south, serving as a land between Asia and Africa. Overall, Saudi Arabia is expected to pour in over $23 million into the country. The proposed bridge connecting the Sinai Peninsula to Saudi Arabia is expected to result in sizeable cash injection into the Egyptian economy, improving the country’s public finances. Local reports have suggested that the estimated cost for the project is approximately $3 to 4 billion. In terms of financing the country’s petroleum

needs, local reports have indicated that the Kingdom is expected to sign a $20 billion deal, and a $1.5 billion deal to develop the Sinai region. Additionally, it was also reported that the deputy head of the Saudi-Egyptian Business Council revealed that Saudi businessmen will invest a total of $4 billion in projects including the Suez Canal, energy and agriculture, and had already deposited 10 per cent of that sum in Egyptian banks. Also receiving backing from the UAE, Emirates NBD’s subsidiary, ENBD Egypt recently signed a $225.1 million facility contract with Egyptian Electricity Holding for two power plants, each generating up to 4,800MW of energy. Located in Borolos in Kafr El Sheikh, and New Administration Capital areas, the construction schedules for the projects are yet to be revealed and is part of the bank’s strategy in the Egyptian market. Most recently, the World Bank announced that it will provide the first $1 billion tranche of a $3 billion loan to Egypt following the parliament’s approval of the government’s economic programme, which outlines the broad strokes of its reform plans, expected to be approved by the end of April.

REFORMS

Far-reaching structural reforms are needed to transform Egypt’s economy

into a dynamic system that can reduce poverty, create productive employment opportunities, and maintain social and political stability, said Moody’s. Economic growth in the past three decades has been moderate and uneven, and insufficient to reduce poverty or absorb the rapidly growing supply of labour. Poverty rates have been persistently high, at about one-quarter of the population, concentrated in rural upper Egypt, and unemployment remains high, particularly for women and youth. At the same time, the fiscal deficit is still large as Moody’s estimate that reserves are only at about three months of imports, and political and social risks remain due to their underlying causes— shortage of formal sector jobs, high unemployment and underemployment among Egyptian youth, and exclusion of poor segments of the population— persist. A recent rebound in the population growth rate combined with the echo boom from the last population bulge resulted in a second youth bulge nearly 50 per cent larger than the first. This will increase pressures on the labour market, infrastructure, social services, and the environment, making it even more urgent for Egypt to undertake wide-ranging structural and policy reforms.

Egypt’s net international reserves have stagnated at low levels $35 $30 $25 $20 $15 $10 $5 $0

11 r-11 -11 l-11 -11 -11 -12 r-12 -12 l-12 -12 -12 -13 r-13 -13 l-13 -13 -13 -14 r-14 -14 l-14 -14 -14 -15 r-15 -15 l-15 -15 -15 -16 a ay Ju Sep ov Jan a ay Ju Sep ov Jan a ay Ju Sep ov Jan a ay Ju Sep ov Jan a ay Ju Sep ov Jan N N N N N M M M M M M M M M M

Source: Moody’s

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PRIVATE BANKING

A promising market segment in the Gulf Increasing wealth across the GCC countries cements industry confidence in a potentially thriving private banking market 34 page 34-38 Private Banking.indd 34

rivate banking and wealth management is always seen as a growing opportunistic area across the GCC. Many financial institutions, both local and international have thrown in their hats trying to take a slice of the pie as they tap into this opportunity. Market observers have however identified specific trends in this market segment. According to the sixth annual Middle East Asset Management Study by Invesco, family

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The UAE is perceived as a safe haven in the region that encourages investors and wealthy individuals to relocate their wealth and themselves to the country.

(Photocredit: Carlos Yudica/Shutterstock.com)

- Bruno Daher, CEO of Credit Suisse Middle East

There is a shift in the risk appetite of HNWIs who are now adopting a more cautious approach.

offices in the GCC are becoming more sophisticated with generational changes as they continue to seek professional help in wealth preservation and generation.

IS THE SECTOR A SAFE BET FOR UAE BANKS?

As the wealth segment gains popularity in the region, particularly in the UAE, some question if this market segment could be a safe bet for banks. Credit Suisseâ&#x20AC;&#x2122;s Global Wealth report expects

the UAE to see an increase in the number of dollar denominated millionaires by 62 per cent over the next five years. Economic growth, combined with the fact that the UAE is viewed more favourably within the region (in terms of diversifying its economy, providing better infrastructure, maintaining political stability) is believed to have helped its private wealth to grow at a faster pace compared to other Gulf nations in the past few years.

Bruno Daher, CEO of Credit Suisse Middle East highlighted three factors contributing to the increase in private wealth management offerings in the country. First is the growing wealth and number of millionaires in the UAE. Second, is due to a shift in the risk appetite of high net worth individuals (HNWIs) who are now adopting a more cautious/low risk approach. Third, in the current economic environment, HNWIs are looking both at capital preservation cont. overleaf

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PRIVATE BANKING

cont. from page 35

UAE expected to see an increase in dollar denominated millionaires by

62%

in the next five years and growing their wealth, which is why there is an increasing need for private wealth management advisory services. “In Credit Suisse’s case, our expectations are to continue to grow our business in the region. Our clients are getting wealthier and looking for new ways to invest their money, and we want to be able to continue to serve them better and help them grow their wealth,” said Daher. Sharing the same sentiments, Jonathan Conner, Middle East Market Manager at J.P. Morgan Private Bank commented, “I think businesses must continually work hard to ensure they are delivering for its clients. As such, there is never room for complacency, especially when you want to stand out from the crowd. Within the wealth management industry, most firms typically specialise their offerings around net worth or investible assets. This allows them to tailor their advisory capabilities to a specific client focus. For example, some banks focus on the mass affluent segment, some on the high-net-worth segment. In the Middle East, J.P. Morgan focuses on the ultra-high-net-worth segment, which includes many of the wealthiest families across MENA including the UAE.”

ENHANCING PRIVATE BANKING

Different banks have different approaches and strategies in driving their private banking and wealth management businesses forward. “Most of the families we work with have a level of wealth that will likely

36 page 34-38 Private Banking.indd 36

Jonathan Conner, Middle East Market Manager at J.P. Morgan Private Bank

Bruno Daher, CEO of Credit Suisse Middle East

outlive the current generation. With this as a backdrop, our job is not to help clients solve ‘how will I maintain my lifestyle or send my children to university’ but ‘how do I plan my legacy so that my wealth does what I intend it to do after I am gone?’ Our clients are concerned about ensuring that their wealth will meet the goals they set today several generations from now. Our clients also often have wealth that is tied to a family or to a business enterprise. They are, as I like to say, ‘institutions with arms and legs’. They have institution-size needs, but very personal issues,” explained Conner. He further stated that many clients are borrowing to finance their next idea, diversifying to preserve the wealth they created, and investing selectively in products to derive as much return as possible given their risk tolerance. He urged clients to think very carefully about tax, and more often than not, their need to access investment banking services.

“From an investments perspective, our offerings are constantly evolving, particularly given an ever-changing market environment. Our colleagues on the investments side of the business are currently looking at hedging strategies in equities, given our neutral outlook, as well as being very specific in the sectors they like, namely, healthcare, technology and financials. In fixed income, they have been rotating some equity exposure into investment grade bonds as well as extended credit, given what they see as better return asymmetry in credit markets,” said Conner. On the hedge fund side, he pointed out that the company’s relative value managers have performed fairly well in 2015 and expect our relative value and macro managers to continue their momentum. “Private equity continues to be an attractive long term complement to a stock/bond/hedge fund allocation. We currently like industries with above cont. on page 38

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PRIVATE BANKING

cont. from page 36

average growth, private credit funds that provide liquidity where capital is scarce and managers that can take advantage of select markets that remain dislocated,” he said. On the other hand, Credit Suisse pursues a multi-shore approach, focusing on serving clients on an onshore basis and providing offshore services as they often seek multishore solutions for diversification reasons. The firm combines its private banking, wealth management, asset management services and investment banking services.

AN INFLUX OF WEALTH

The UAE is said to have experienced an influx of wealth over the last couple of years. Industry players believe that political stability and security of the UAE, in the context of the broader region, is an important reason for individuals and companies wanting to set up offices in the country. In addition to this, Conner highlighted that the country has also been building the right infrastructure to encourage businesses and professionals to relocate. Apart from physical infrastructure, the UAE has also fostered an entrepreneurial spirit across the nation. “I personally know many people from the broader region, as well as from around the world who have come to the UAE, specifically to relocate their existing family business or to start up a new business. There are also professionals who came to the UAE with a large corporation and then left them to found their own business, as they have found the environment conducive for entrepreneurship. While there is inevitably still some way to go and a need to refine and improve in certain aspects, the UAE has undoubtedly come a long way in a short period—and the influx of businesses and human capital is a testament to that,” said Conner.

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Private equity continues to be an attractive long term complement to a stock/bond/hedge fund allocation. - Jonathan Conner, Middle East Market Manager at J.P. Morgan Private Bank

Adding to this, Daher highlighted, “For years the UAE, and Dubai in particular, has been actively seeking and attracting foreign investment. This influx of foreign funds has helped the economy to sustainably grow. More recently, the UAE’s commitment to creating a more diversified economy by focusing heavily on growing non-oil sectors has been a key reason for this influx of wealth. Investors have benefited from boosts in various such sectors [such as real estate] over the past few years.” Another factor contributing to this is that the UAE is perceived as a safe haven in the region that encourages investors and wealthy individuals to relocate their wealth and themselves to the country. Additionally, the growth of talent in the UAE, along with the burgeoning opportunities for investment, are some of the reasons why Daher believes that wealth is more likely to stay onshore in the future.

THE UAE ADVANTAGE

A lot has been said about wealth management opportunities in the UAE. According to Daher, the UAE is interesting and unique in many ways for four reasons: the economy is well diversified; it has advanced infrastructure capabilities; it is strategically located; and it is stable. “The UAE, and Dubai in particular, has been considered as one of the fastest growing financial centres in the world which has led may international bankers and big local players to setup their regional hubs or offices here. While Dubai has been taking the lead,

Abu Dhabi is also steadily emerging in this space. Therefore the UAE has a lot more to offer than before—growing wealth, more financial centres, a strong regulatory framework, and an excellent infrastructure—all of which contribute to and enable private banking businesses to thrive,” he said. “They are living in an environment where there is huge growth and they understand the meaning of risk and investing in opportunity, so broadly we see that they have an entrepreneurial spirit when it comes to doing business. A drop in oil prices has also caused the UAE to review their investment opportunities in a globally diversified manner. They seek higher growth and not just the preservation of capital like many clients do in the more mature markets, but also growth opportunities. This is why our holistic approach has always helped them because their needs are not always traditional or capital preservation related,” Daher explained. Commenting on this, Conner added, “The UAE is a natural hub for the region. It has excellent infrastructure and has established itself as a pleasant place to live and work— for both clients and bankers alike. This is true of other countries in the region too, but the UAE has certainly been very proactive in positioning itself in this way for a number of years now and in undertaking the necessary work to be able to deliver on this promise. As a private banking hub, I am sure it will continue to be a centre for relationship management that operates out of the region.”

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AWARDS

ased on a peer-vote process, Banker Middle East is proud to announce the winners for the UAE Product Awards. Twenty three banks and financial services providers active in the United Arab Emirates shared a total of 46 Banker Middle East Product Awards between them; the number of Awards themselves indicates the impressive growth and evolution of banking and financial services products in the country. Ten institutions picked up multiple Awards, between them taking home 33 of the 46 Awards on offer. The results are not decided internally by Banker Middle East; further, they are not chosen by a small panel of judges. Winners in the Banker Middle East UAE Product Awards programme have this year triumphed in one of the stiffest competitions ever! Retail and corporate customers are demanding services that meet their evolving requirements and to satisfy this demand financial institutions need to be working unceasingly on the development and improvement of the financial products and services they offer. We see that progress very clearly this year and the Awards clearly represent the achievements of the industry, said Robin AmlĂ&#x201D;t, CEO, CPI Financial. cont. on page 42

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PARAGON PREMIUM INVESTMENT FUND

WORK FOR TODAY Let us secure tomorrow

The Future of Your Investment is in Australia Office 1, Level 2, 1091 Stud Road Rowville VIC 3178, Australia

Alande Mustafa Safi CHAIRMAN Paragon Premium Investment Fund Pty. Ltd.

PO Box 2127 Rowville, VIC 3178, Australia

alandesafi@paragonbg.com +613 9759 9037

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Melbourne +61402 755 582 Dubai + 971562 744 616 Jakarta + 81210678846 Shanghai +8613916036829

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AWARDS

cont. from page 40

BME PRODUCT AWARDS 2016 â&#x20AC;&#x201D; UAE WINNERS

Best Home Finance Product Abu Dhabi Finance - Buy2Build

Best SME Loan Commercial Bank of Dubai - Bundle Finance

Best Personal Loan ADCB - Personal Loan for Expatriates

Best New SME Product Commercial Bank of Dubai - Bundle Finance

Best Credit Card ADCB - Simply Life Cashback Credit Card

Best Private Equity Fund Abu Dhabi Capital Management - ADCM Secondary Private Equity Fund

Best SME Internet Banking Service ADIB - Business Banking Best SME Exchange Service ADIB - Business Finance Solutions Best Premium Banking Service ADIB - Private Banking Best Business Insurance Product ADNIC - Property Insurance (Corporate) Best Forex Trading Service ADS Securities Best Islamic Fund Al Hilal Bank - Al Hilal GCC Equity Fund Best Equity Research Arqaam Capital Best Business Credit Card Aseel Finance - Aseel Business Credit Card Best Islamic Card Commercial Bank of Dubai - Al Tijari Infinite 42 page 40-44 Awards.indd 42

Best New Online Service Dubai First - Dubai First Online Best Car Finance Dubai Islamic Bank - Al Islami Car Loan Best Online Banking Service Dubai Islamic Bank - Al Islami Online Banking Corporate deal of the year Dubai Islamic Bank - Metito Bilateral Deal Best SME Card Emirates NBD - Business Banking Credit Card Best Wealth Management Service Emirates NBD - Private Banking Best Bancassurance Products FGB - Bancassurance Best SME Trade Finance Offering FGB - Business Banking Best Co-branded Credit Card FGB - Co-branded Cards cont. on page 44

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A track record of long-term growth. An award-winning reputation.

Since launching in 2006, Gulf Capital has become one of the region’s largest and most successful alternative investment ﬁrms. Today, we celebrate 10 years of delivering long-term returns and industry leading results. Our award winning performance has made us the ﬁrm of choice for regional and global investors. Gulf Capital – Celebrating 10 years of achievements and proven results. www.gulfcapital.com

Firm of the Year MENA 2014

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Best SME Credit Fund 2015

Best Private Equity Firm in the Middle East, 2011, 2012, 2013, 2014 and 2015

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AWARDS

cont. from page 42

BME PRODUCT AWARDS 2016 — UAE WINNERS

Best Onshore Wealth Proposition FGB - Wealth

Best New Investment Product NBAD - Cash Plus Fund

Best Real Estate Advisory Mashreq - Real Estate

Best Fixed Income Fund NBAD - Fixed Income Fund

Best Customer Loyalty Programme Mashreq - Salaam Rewards

Best Corporate Advisory Service NBF Capital

Best Mobile Banking Service Mashreq - Snapp

Best Customer Service - Retail RAKBANK

Best Premium Credit Card Mashreq - Solitaire

Best Regional Equities Trading Service Swissquote

Best Trade Finance Offering Mashreq - Trade Finance

Best Managed Advisory Service Union Bancaire Privée

Best SME Customer Service National Bank of Fujairah

Best Customer Deposit Scheme Union National Bank - Accelerating Rate Deposit

Best Customer Service - Corporate & Investment Banking National Bank of Fujairah

Best Consumer Insurance Product Union National Bank - Critical Illness

Best Treasury Management National Bank of Fujairah - Treasury Best Cash Management National Bank of Fujairah - Cash Management Best Savings Product National Bonds - Dirham Savings Scheme

Best Savings Account Union National Bank - Every Day Savings Account Best Current Account Product Union National Bank - Value Plus Current Account Best GCC Equity Fund Waha Capital - Waha MENA Equity Fund cont. on page 46

44 page 40-44 Awards.indd 44

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PRIVATE BANKING Expansion and Growth

How can your family business become a part of a global family? At Emirates NBD Private Banking, we can help expand your ventures across borders and grow globally. By harnessing our expertise across years, and markets with the right advice and opportunities, we can help you reach your business expansion goals. So you don’t just go global, but grow global as well. Emirates NBD Private Banking. Opportunities to Inspire. Abu Dhabi – Dubai – London – Riyadh – Singapore 800 456 |

emiratesnbd.com |

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privatebanking@emiratesnbd.com

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AWARDS

cont. from page 44

We have made some great strides in developing our offering to SME customers over the past few years, with new enrollments for ADIBâ&#x20AC;&#x2122;s Business Internet Banking service growing 106 per cent year on year. ADIB recognises the importance of SMEs to the local economy and we have a pipeline of initiatives in place to further enable business owners to reach their full potential. We are also heavily investing in our internet banking platform to deliver the best banking experience to our customers. This award shows that our clients have made the right decision in choosing to bank with ADIB. - Tirad Al Mahmoud, CEO of ADIB

The Bank is committed to being a leading contributor to the countryâ&#x20AC;&#x2122;s development and prosperity. Aligned with this vision, DIB continues to lead and facilitate transactions with top corporates across the UAE and beyond. Within this mindset and as infrastructure development continues to be an attractive sector for local and international investors, we have partnered with Metito given their successful business model and long-term vision to turn challenges into an opportunity for the local economy. - Naveed Ali, Chief of Corporate Banking, DIB cont. on page 48

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AWARDS

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Everything we do at FGB revolves around customercentricity, with each product and service developed with the needs of our customers firmly in mind. As such, we’re dedicated to ensuring that our customers have the best possible experiences with us and these awards are a reflection of these ongoing efforts. We’re very pleased to have received this recognition from our peers in the banking industry, as we continue to enhance our offering and build on our achievements. - Hana Al Rostamani, Head of the Consumer Banking Group at FGB

At Mashreq, we continue to push the boundaries in innovation and customer-centricity. Our customers’ loyalty and faith in our brand spurs us on to deliver superior banking solutions which in turn resulted in this series of prestigious awards. After more than 49 years of business operation in the UAE we look forward to continuing to be at the forefront of banking innovation and customer satisfaction. - Subroto Som, Head of Retail Banking Group at Mashreq

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ADVERTORIAL

Jersey Jersey connects connects with the with the

GCC GCC

With a strong and growing presence in the region, Jersey is increasingly With a strong and growing presence providing a range of private wealth in the region, Jersey is increasingly management services to GCC providing a range of private wealth clients, as Geoff Cook, CEO of Jersey management services to GCC Finance, explains. clients, as Geoff Cook, CEO of Jersey Finance, explains.

This is time for for Jersey and its relationship with thewith the wealth management – with a good of how the This isan anexciting exciting time Jersey and its relationship wealth management – understanding with a good understanding of how the GCC. Jersey is not onlyonly returning to Dubai in Aprilin with individuals to run succession planning and GCC. JerseyFinance Finance is not returning to Dubai April withregion’s wealthy region’s wealthy want individuals want to run succession planning and its increasingly popular annual roadshow event, this time it will control their assets – and a solid reputation for helping people its increasingly popular annual roadshow event, this time it will control their assets – and a solid reputation for helping people be spreading the word further by bringing a complementary spread their investment risk around the world. be spreading the word further by bringing a complementary spread their investment risk around the world. roadshow to Doha. It makes total sense, then, that they’d turn to Jersey. The Island roadshow to Doha. makes totalexpertise sense, then, that they’d turn to Jersey. The Island These events are united by a single heading: Clear Direction. It’s has more It than 50 years’ in delivering private wealth These events by a single Clear Direction. It’s has more thanestate 50 years’ expertiseplanning, in delivering private wealth an apt title, as itare notunited only reflects Jersey’sheading: burgeoning relationship management, trusts and and succession and it’s an it its not only reflects Jersey’s management, trusts estate andof succession withapt thetitle, GCC,as but commitment to the region.burgeoning relationship a secure jurisdiction. Jersey sits inand a stable corner the world, planning, and it’s boasts anaAA ratingjurisdiction. from StandardJersey & Poor’s, with the GCC, but its commitment to the region. secure sitsand in abenefits stable from corner of the world, For more than 10 years, Jersey Finance, Jersey’s government and a unique constitutional position and allegiance to & the Englishand benefits from boasts an AA rating from Standard Poor’s, the Island’s regulator, the Jersey Financial Services Commission, For more than 10 years, Jersey Finance, Jersey’s government and Crown, which dates back to 1204. a unique constitutional position and allegiance to the English have been making regular visits to the GCC, which now accounts the Island’s regulator, the Jersey Financial Services Commission, for around 15 per cent of the total value of bank deposits on the As well asCrown, having independence which dates over backits toaffairs, 1204.with an elected have been making regular visits to the GCC, which now accounts Island. parliament and its own financial drivers, Jersey also has a longfor around 15 per cent of the total value of bank deposits on the As well as having overcan its be affairs, standing partnership with the independence City of London. This crucialwith an elected In 2011, Jersey Finance set up a representative office in Abu Island. parliament and financial drivers, Jerseyfor also has a longfor GCC families seeking toits useown London as a home or location Dhabi, adding to this presence with a Dubai office in 2015. These investment. standing partnership with the City of London. This can be crucial offices have fostered a strong growing relationship with in Abu In 2011, Jersey Finance setand up a representative office for GCC families to use as a home or location for the business community in the region, an advisory But you don’t get far if you’reseeking not offering the London right structures, Dhabi, adding to this presence withwith a Dubai officegroup in 2015. These of senior finance and legal professionals on the ground helping and this isinvestment. where Jersey’s private wealth management provision offices have fostered a strong and growing relationship with those links become even tighter. really comes into its own. The Island built its reputation on the the business community in the region, with an advisory group But you don’t get far if you’re not offering the right structures, establishment of trusts and private companies (it now has more Thesenior regionfinance is, of course, experiencing some hugely dramatic of and legal professionals on the ground helping this is where Jersey’s private for wealth management provision than 900 and regulated trust company businesses, example), but changes, andbecome this is affecting what its businesses, wealthy those links even tighter. really intoJersey its own. The Island itsTrust reputation on the more recently itscomes innovative Foundations and built Private individuals and families demand from financial services providers. establishment of trusts and private Companies have proven increasingly popular too –companies especially (it now has more The is, of course, experiencing some In itsregion Global Wealth report (published in 2015), thehugely Boston dramatic among those greater control their assets. thanseeking 900 regulated trust over company businesses, for example), but Consulting Group estimated that private wealth in the Middle changes, and this is affecting what its businesses, wealthy more recently its innovative Jersey Foundations and Private Trust East and Africa stood at US$8 trillion in 2014, and willservices reach an providers. In addition to this, Jersey has been providing family office services individuals and families demand from financial Companies have increasingly popular estimated $13 trillion in 2019, with Saudi Arabia ($2 trillion) and for decades – something thatproven chimes in a region where familytoo – especially In its Global Wealth report (published in 2015), the Boston among those seeking greater control over their assets. the UAE ($1 trillion) among the largest markets. wealth and business are paramount, and have anticipated to grow Consulting Group estimated that private wealth in the Middle in the coming years. Families are getting bigger, interests are becoming more complex East and Africa stood at US$8 trillion in 2014, and will reach an In addition to this, Jersey has been providing family office services and international, and theinvolatile – with Perhaps most crucial of–all, Jersey’s expertise extends estimated $13 trillion 2019,geopolitical with Saudilandscape Arabia ($2 trillion) and for decades something that chimes into a Islamic region where family everything from the Arab Spring to ongoing turmoil in Syria, Libya finance. The Island’s legal system hasn’t had to change in any the UAE ($1 trillion) among the largest markets. wealth and business are paramount, and have anticipated to grow and Iraq – means wealth planning needs to be more robust than way in order to accommodate Sharia-compliant products, and in the coming years. ever to safeguard assets safe forinterests future generations. it’s flexible enough to handle the nuanced needs of the various Families are getting bigger, are becoming more complex schools ofPerhaps Islam. most crucial of all, Jersey’s expertise extends to Islamic and international, andinthe landscape – with Families and businesses thevolatile GCC aregeopolitical therefore looking for everything from the Arab to aongoing turmoil in finance. The Island’s legal system hasn’t had to change in any a few key elements from theirSpring partners: flexible approach to Syria, Libya and Iraq – means wealth planning needs to be more robust than way in order to accommodate Sharia-compliant products, and ever to safeguard assets safe for future generations. it’s flexible enough to handle the nuanced needs of the various schools of Islam. Families and businesses in the GCC are therefore looking for a few key elements from their partners: a flexible approach to

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50 page 50-51 Advertorial.indd 50

This diversity of w rapidly to emergin for real estate inve amongst investors

These days any ju financial services h standards, due dil Not only does Jers sophisticated lega OECD’s Common the US Foreign Acc received glowing e and IMF.

Indeed, Jersey has transparency and appeal to investor initiatives become

Jersey’s finance of wealth manageme innovation with hig and vast expertise such the Island is p planning and inves respond to the rap

With all this to dis strengths as a cen roadshow is set to advisory commun investment manag see you there.

linkedin.com/ /jersey-finan

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KUWAIT

OMAN

BAHRAIN

QATAR

UNITED ARAB EMIRATES

KINGDOM OF SAUDI ARABIA

This diversity of work enables Jersey’s practitioners to respond rapidly to emerging new trends – such as the growing demand for real estate investment in UK property and the increasing focus amongst investors for products with a philanthropic bent. These days any jurisdiction looking to remain at the forefront of financial services has to act in lock-step with global transparency standards, due diligence and anti-money-laundering measures. Not only does Jersey offer a robust yet flexible, modern and sophisticated legal framework, it was also an early adopter of the OECD’s Common Reporting Standard and is fully signed up to the US Foreign Account Tax Compliance Act (FATCA), and it has received glowing endorsements from the OECD, World Bank and IMF. Indeed, Jersey has managed to strike the difficult balance between transparency and confidentiality – something that is of huge appeal to investors in the Middle East as this web of tax reporting initiatives becomes the global norm. Jersey’s finance offering sits at the forefront of global banking, wealth management and corporate services, balancing product innovation with high standards of regulation, world class legislation and vast expertise from a range of seasoned professionals. As such the Island is perfectly placed to support the complex estate planning and investment ambitions of GCC investors, as they respond to the rapidly changing global financial picture. With all this to discuss and more, not least Jersey’s enduring strengths as a centre for Islamic finance, the Clear Direction roadshow is set to attract a broad cross-section of the GCC advisory community – including wealth practitioners, lawyers, investment managers and other finance professionals. We hope to see you there.

linkedin.com/company /jersey-finance

@jerseyfinance

jerseyfinance.je

OMAN

Jersey: 10 key strengths + + + + + + + + + + +

50 years’ experience in private wealth management Deep ties to the GCC Early adopter to the latest transparency standards Glowing recommendations from the OECD, World Bank, IMF and Standard & Poor’s A substantial network of top-level financial services professionals An enviable community of support services, from legal to accounting Innovative products – from trusts to Foundations, Private Trust Companies and family offices Expertise in Islamic finance Stable location Close ties to London The perfect blend of the transparent and the confidential

Clear Direction, the Jersey Finance GCC Roadshow 2016, will be in Doha on 18 April and Dubai on 20 April. Find out more at www.jerseyfinance.je/gcc-roadshow-2016

youtube.com/jerseyfinance

vimeo.com/user17505711

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CASE STUDY

Bank Audi aligns IT with business Danny Dagher, Chief Information Officer at Bank Audi explains how the bank revolutionised its IT competencies to ensure coherence with its business goals

usiness leaders sometimes see IT as a ‘black box’—a dauntingly complex function that is supposed to serve business objectives but often has its own agenda. And IT leaders sometimes find business goals to be disconnected from the realities of limited resources, budget, and staff. However, working closely with VMware Professional Services (VMWare), Bank Audi found a way to bridge the gap between business and IT and create new business advantages. Based in Beirut, Bank Audi is a commercial bank in Lebanon and one of the fastest growing banks in the region. With a sizable presence in Egypt, Turkey, Saudi Arabia, Qatar, Jordan, France, and Switzerland, Bank Audi offers a range of products and services that cover commercial and corporate banking, retail and individual banking, on-line brokerage, private banking, and investment banking.

THE CHALLENGE

Bank Audi needed to tighten the alignment of IT capabilities with business goals in order to support continued growth and a diversifying mix of customers and banking services. To accomplish this objective, the bank’s CEO turned to Danny Dagher, an executive with business development and strategic acquisition experience,

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Danny Dagher, Chief Information Officer, Bank Audi

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to lead an IT transformation. Dagher became the bank’s CIO. “When I first joined Bank Audi, if I had to list the 10 or 15 jobs that were part of my charter, nothing related to IT would have been on that list,” said Dagher. Senior leadership recognised, however, that Dagher’s combination of business expertise and technical knowledge would be an asset in closing the business/IT gap, particularly if he could leverage the experience and guidance of trusted technology partners.

We had to treat IT as a business to enable the bank to grow and go through the rigours of budgetary requirements, regulatory mandates, and compliance issues. So we established IT and technology as one of the four pillars for our business strategy and our future journey. - Danny Dagher

THE SOLUTION

One of Dagher’s first moves as CIO was to approach IT transformation from a business perspective in terms of budget. “We had to treat IT as a business to enable the bank to grow and go through the rigours of budgetary requirements, regulatory mandates, and compliance issues,” he said. “So we established IT and technology as one of the four pillars for our business strategy and our future journey.” The next step was to find the best partners. That was easy, according to Dagher, because he had already established a relationship with VMware. “They knew what we were going after,” he said. “We did not have to explain our vision to them.” Dagher engaged with the Accelerate Advisory Services (AAS) team, part of the VMWare organisation, to help put the wheels of transformation in motion. “We were comfortable with the team,” he said. “It was like talking to someone who already knew what my problems were,” he said. Dagher wanted the AAS team to help the IT department take business agility to a higher level and become a true service broker. The AAS team analysed Bank Audi’s situation and requirements and identified opportunities for immediate cost savings by moving away from proprietary systems to standard, commodity hardware and by building a private cloud to save on third-party cloud service offerings. This included tuning the internal information technology infrastructure library (ITIL) process and governance. More importantly, however, the AAS team provided detailed recommendations for making the transition to an agile infrastructure that could deliver on the vision of more satisfied end users and tighter alignment between business and IT objectives.

The team recommended the following initiatives, aligned to Bank Audi’s transformation goals:  Infrastructure layer: Implement infrastructure virtualisation (compute network-storage) and automation of IT operations.  Applications layer: Provide predictable reliability through automation of disaster recovery (DR) and increase agility through cloud automation for faster, simpler deployment of IT resources.  People layer: Enable the IT team to provide solutions to the business unit in an agile and efficient manner (through cloud automation), in a reliable manner (through cloud operations and DR automation), and in a sustainable and predictable manner (through cloud business management). Source: Bank Audi

The AAS team devised a two-phased approach to implementation. Phase one focused on the transformation of the infrastructure layer, and included a migration from physical servers to virtual servers and implementation of a basic model for cloud operations, including capacity and performance management, and cloud automation via virtual machine dispatching. The focus of phase two is disaster recovery automation as a way to ensure reliability for the efficiencies and agilities adopted in phase one. It includes further virtualisation of physical assets and expansion of Bank Audi’s capabilities around cloud operations automation. cont. overleaf

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CASE STUDY

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“The Accelerate Advisory Services team helped us tremendously, because they understood that our end goal is not to build infrastructure,” said Dagher. “The end goal is not to automate and manage. The end goal is to empower the business to accomplish its goals quickly and easily, and that means we need to be a true service broker: we get the request, it’s provisioned, and it’s built. Whatever our constituents want to do should be easy for them. And for us, that means infrastructure is no longer a black box. It’s a transparent box.”

THE RESULTS

With guidance from VMWare, IT has begun the transition to its new role as service broker and business enabler. “Our service delivery model now incorporates the key strategic elements the team has consistently talked to us about,” said Dagher, “From the software-defined data centre to the hybrid cloud to end-user computing and mobility, we can run our own business more efficiently, so we can help our constituents run their businesses more efficiently, with transparency over their costs and revenues. They can now accelerate their business initiatives, from launching new products to improving productivity.” Equally important, IT at Bank Audi is becoming a revenue-generating business, because the processes are now in place to implement chargeback for services. “In the past, chargeback was not even possible,” said Dagher. “We could do a showback, we could show them our cost and give them some visibility; but now we can comfortably chargeback if we add value.” Thanks to these new capabilities, Dagher has also been successful in elevating the reputation of IT as a service broker among lines of business.

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KEY CHALLENGES  Growth, diversifying customer base required greater agility and alignment with goals.  Business units were beginning to bypass IT to find needed services.  IT was unable to chargeback for service delivery. SOLUTION  VMWare engagement provided guidance for IT transformation.  Phase one: Infrastructure transformation via virtualisation and cloud automation.  Phase two: Expansion of virtualisation, additional automated cloud operations capabilities. RESULTS  IT now able to serve as a true service broker for business initiatives.  Improved reputation for service helps IT prevent ‘shadow IT’ initiatives.  Transformed IT into a revenue generating entity and gave visibility into IT costs.  Capital expenditure savings of millions of dollars in phase one alone. Source: Bank Audi

“We wanted our IT team to stand against any competition, because we had to assume that any business line could outsource IT services,” he said. “They could literally bypass us, which we had started to see glimpses of two or three years ago when people started asking to use their own mobile phones at work. Some of them can even buy their own VPN services at this stage. So there was pressure on the IT teams to survive.” With the changes Bank Audi made to its IT capabilities, “We can now address their requirements quickly and effectively, whether the needed service was provided through internal or external sources,” said Dagher. “Bank Audi started seeing capital expenditure savings of millions of dollars even before we finalised phase one,” said Dagher. “So we’re very proud and very committed to launching phase two very soon.”

The teamwork between Bank Audi team and VMWare is also a source of pride for Bank Audi. “We worked together on defining a timeframe, and we’ve been sticking to that timeframe extremely well,” he said. “We get compliments from both directions. We tell the team that you’re doing a great job, and in return the team always compliments the professionalism of our team, because we’re the first to undertake this sort of effort in this part of the world.”

LOOKING AHEAD

The strategic advice and tactical coaching from VMWare helped Bank Audi align IT capabilities with business objectives, according to Dagher. “That makes us more comfortable that is the right partner for the future,” he said. “We definitely feel that we have a trusted relationship with to start a long-term journey to the bank we’re aspiring to build.”

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IN-DEPTH

Sagheer Mufti, Chief Operating Officer, ADIB

Collaboration—the key to getting ahead Sagheer Mufti explains how ADIB’s collaboration with IBM has enhanced its digital transformation capabilities

ccording to a recent GCC industry survey, a customer will increase business with a bank if it is convenient, simple and more accessible. Sixty-four per cent, or three out of four customers in the survey sample, said that they’re willing to switch to banks which offer digital services and products. In a bid to enhance its services and retain its customers, Abu Dhabi Islamic Bank (ADIB) partnered with IBM in December last year to build a digital studio. First of its kind in the region, the digital studio seeks to facilitate various digital innovation projects across the bank, with an aim to deliver products that allow a more dynamic and engaging customer experience.

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ADIB’s digital studio serves as a proactive means to an end. It acts as a department within the bank, comprised of professionals from both ADIB and IBM that work together in parallel as they test the feasibility of a particular digital product that they intend to launch. According to Sagheer Mufti, Chief Operating Officer at ADIB, the digital studio incorporates the ‘agile methodology’, a process where different parts of the organisation are brought together to support the rollout of the product. The project moves on parallel work streams at the same time, enabling the bank to identify at an early stage any problems and evaluate if the project is feasible or otherwise.

of customers in the GCC are willing to switch to banks offering digital services and products

One would imagine that hiring a third party would be more cost-effective for the bank, but Mufti explained that it was not about bringing down cost, rather about enriching customers and offering them something they want. cont. on page 58

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“To us, we would rather do this in-house as we do not want to share our intellectual property with a third party. The conceptualisation is critical to our success as it affects our customers. The digital design studio is about creativity and the design concept, forming a strategic capability for us,” said Mufti. One of the first products rolled out by the digital studio is the an app created for key Dubai festivals in partnership with Dubai Festivals and Retail Establishment, an agency of Dubai’s Department of Tourism and Commerce Marketing. The app will provide customers and app users with cashback offers, mega raffle draws and valuable rewards on covered cards spends and flagship financial products throughout key events in 2016 such as the Dubai Shopping Festival, the Dubai Food Festival, Dubai Summer Surprises, Ramadan in Dubai, Eid in Dubai and Dubai Motor Festival.

Digital transformation is about serving the customers in the way they want to be served.

- Sagheer Mufti, Chief Operating Officer, ADIB

Commenting on digitisation, Mufti said, “Digital transformation is about serving the customers in the way they want to be served. In terms of digital services, ADIB seeks to create a design that holistically fits with the lifestyle of a customer, providing a service with minimum friction and fragmentation, working towards a seamless experience.” The digital studio also enables ADIB to monitor the development process, ensuring that the customer journey is

embodied in the design of the product. ADIB sees that it is important to tailor the bank’s products to the lifestyle of customers. The studio introduced ADIB to a new way of working in product design and development, in a more quick and cohesive manner. Mufti believes that industry needs to increase the effectiveness of the many channels of technology in serving customers and delivering products. This is incorporated in the formation of the digital studio where the ADIB seeks to enhance the means of delivering the bank’s products to its customers. Mufti highlights that collaboration is the best way to move forward. “We may not be able to do all the things we need to do on our own. Therefore, looking for the right partners to work together with us and create these capabilities in-house is a good solution for us.”

ADIB’s digital studio located in its Abu Dhabi office.

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Securing payment transactions

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IN-DEPTH

Fraud is a legitimate concern in the Middle East.

Johan Gerber, Group Head of Processing Product Management at MasterCard Worldwide, describes what is needed in the payment management system in the Gulf

escribe the payment security landscape in the region.

One of the technologies that was born here in the MENA region is the ‘safety net’, in 2013, where we monitor in real-time the billions of transactions on our network, looking for strange patterns. For example if your card is used in Dubai, and five minutes later in Johannesburg—that doesn’t make sense. We can see large scale attacks on our network, or on our customers, by monitoring at a macro level across the network.

Johan Gerber

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With Egypt and the Southern Gulf cluster, we would actually go to these markets demonstrating how we’d be able to collaborate with banks, regulators and merchants in the market to bring a robust fraud prevention technology to the market. The purpose here is twofold; to bring down fraud and to open new transaction methods for existing cardholders. When everything is brought together, you have the local domestic markets, the governments who have a very clear view of where they want their markets to go, financial inclusion and the expansion of digital commerce. cont. on page 62

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IN-DEPTH

cont. from page 60

What’s the latest product you’ve launched and how has it fared?

In the US out of the $118 billion transactions that were declined, only $9 billion were fraud. So you see a whole number of transactions that were declined accidently or incorrectly and we ask; how do we change this and make it much better? We came up with this technology called the IQ series. Most fraud detection systems focus on elements of risk. However, the IQ series focuses on positives. For example, if you’re a frequent traveller, the system has seen your device and card together at a number of merchants and have never seen that you dispute any transactions. It is therefore able to trust your card and your phone when being used together. It looks at the elements of trust surrounding transactions. This reduces friction and conveys to the issuing bank that we are comfortable with this transaction, so there is no need to decline it just because it looks like it’s high risk. So, if all of a sudden you visit a country notorious for fraud, typically the fraud system will say there is high risk and it would have to look into this. However, the IQ series will say that although it’s high risk, it is something that you very often do, therefore do not decline. It balances out the risk elements with the positive elements and both systems work hand in hand using machine intelligence, algorithms to compile this data providing context in real-time, happening all in a matter of milliseconds.

What are the main issues raised in the Middle East payment security landscape and how can we address them? We are obviously concerned about fraud in the e-commerce space and it is a concern for us everywhere. It is still under control as we have a good

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Machine to machine intelligence is becoming more important because we need to do all of these things at scale as we need to scan lots of data at milliseconds so we will see a lot more of machine intelligence and machine learning in the future. - Johan Gerber, Group Head of Processing Product Management at MasterCard Worldwide

handle on it, but we need to make sure that we are ahead of these criminals with good technology as well as partnerships as these countermeasures get deployed. One concern is fraud and the other concern is when something goes wrong; the impact on the end consumer in terms of the declines and the cost that is associated with that, but also with technology we ensure that we don’t have to be concerned about that. The way we address this is by enhancing the amount of intelligence and data. Today what happens is, when you insert your card or you do a transaction, a lot of data goes from your phone to the merchant through our network to the issuing bank. These are pieces of static data include the amount of the transaction, date and time, the merchant’s name, the goods that you bought and so forth. What this new data does for us is it provides contacts in the form of the known device with a good reputation, and that has a record. So we bring smart technology algorithms machine learning into the system.

What is the reception that you have been getting with the series?

The reception has been great; all of the banks are keen to try it out and see

how it works. We are working actively with merchants and issuing banks in order to get this deployed. There is some technical work to be integrated and you need the market to participate to provide the data. We have no partners in the region just yet as we launched in March, however we have done a few pilots in the US, so the principle works and we have decided to take to market and launch it together. So this series is very new and we have over 3,000 merchants participating mostly in the US and now we are actively going after Middle East, Africa and Europe.

What situations expose victims to such fraud?

Ultimately we work with our banks in order to protect the consumers, therefore they are seldom the victims. Liability is usually shared between the banks and the merchants as everything is usually consumer friendly. The types of fraud are usually when somebody steals your card or you lost your card and somebody uses it, or when somebody hacks into the database of a merchant or someplace where these card details are stored. What we do to combat this type of fraud is bring all relevant technologies to bear so we have things that prevent hacking attacks such as PCI compliance, EMV cards and tokenisation.

What are your thoughts on the future of payment security systems?

It’s very much going seamless, using a lot more of machine learning. Machineto-machine intelligence is becoming more important because we need to do all of these things at scale as we need to scan a lot of data in a matter of milliseconds, so we will see a lot more for machine intelligence and machine learning in the future.

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IN-DEPTH

Bank satisfaction on the rise

Thirty four per cent of UAE respondents and 38 per cent in KSA would recommend their bank to friends or colleagues.

ased on our (Souqalmal.com) inaugural Bank Satisfaction Index, over 34 per cent of respondents in the UAE and 38 per cent in Saudi Arabia (KSA) would actively recommend their bank to friends or colleagues. The results are from the latest and most comprehensive NPS survey conducted by Souqalmal.com and are a big step towards understanding what customers want from their bank and what really drives their loyalty. With over 750,000 visits per month, Souqalmal.com has keen insights into customer needs, behaviours and trends and the Bank Satisfaction Index is the perfect tool for us to deliver this feedback to our partner banks. Banks are in turn

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paying attention to such initiatives and how these can improve the overall bankcustomer relationship in the UAE. The customers have spoken. It’s not surprising that customer service has been pointed out as the main area for improvement. Around 36 per cent of respondents in the UAE and 32 per cent in KSA would like to see an improvement in banks’ customer service. But, what does customer service really mean? A closer look at our results showed the demand for a smoother branch and call-centre experience, more straightforward product information across various bank channels and timely resolution of complaints as the primary areas requiring improvement. cont. on page 66

(Photocredit: Jirsak/Shutterstock.com)

Ambareen Musa tells Banker Middle East the condition of the regional banking system from the customer’s perspective

Ambareen Musa, CEO of Souqalmal.com

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IN-DEPTH

cont. from page 64

Another area touched by our consumers was the improvement in banks’ product offering. Over 25 per cent of the respondents in the UAE and 22 per cent in KSA want better and more relevant banking products. Having said that, banks in the region are increasingly moving away from offering ‘one-size-fits-all’ type products, and moving towards more customised products, be it credit cards to suit the avid traveller or physical activity-linked accounts for the fitness enthusiast. The question is whether those bells and whistles are features that customers really want. Apart from the ones just mentioned, UAE residents also expressed a demand for better and more transparent rates on loans, a more efficient online banking offering and seamless phone banking assistance. We, at Souqalmal, are providing just that—bridging the gap between banks and customers. We find that there is a need for consumers to see the products the way it is, with all facts and figures laid out for proper comparison. But it’s definitely not all grim—bank satisfaction in the UAE is on the rise. The percentage of those who would actively recommend their bank has increased by seven per cent from the 27 per cent in 2014, and more than doubled when compared to the 15 per cent in 2013. And this is not all by chance. In the last few years, there has been a shift towards customer retention and recommendation as opposed to acquiring new customers

36 % 32 %

of UAE respondents and

in KSA want to see improvement in customer service

in KSA want better and more relevant banking products

in mass numbers. There is a lot more investment in technology to allow customers to seamlessly transfer funds, access their accounts online and even reward them for good credit history. I believe loyalty through cost effective channels will continue to grow throughout 2016. We celebrated this upward swing at our inaugural fintech event held last month in collaboration with Google and INSEAD. Digital transformation is the buzzword across the banking industry all over the world. And retail banks in the UAE and KSA are embracing the change and transforming their processes to keep pace with our consumer’s demands and expectations. Digitisation in banking is essentially the integration of digital technologies into banking processes. And the ultimate impact is not just changing the way the customer banks, but also how banks interact with their customers. From a bank’s perspective,

it will also allow better pricing and assessment of risk of customers, let alone being able to provide much better customised solution. Peter Zemsky, Deputy Dean at INSEAD and an expert in digital disruption, joined us at the fintech event as the keynote speaker. He said that data shows banks reporting increases in innovation investments over prior years grew from 15 per cent in 2009 to 84 per cent in 2014. Areas where investment was heavy have included channels, customer service and experience, processes, products and marketing and in 2015, it was estimated that $20 billion went into fintech globally. This number is expected to grow steadily in the next few years. “Bearing in mind the increased usage of smart phones and the various demographics, customer expectations are changing and bank strategy has to evolve to create value for this varied customer base,” he said. “Many regional governments are empowering banks to make these changes and allowing them to undertake some very ambitious expansive programmes focused on innovation and digital transformation. They know they have to innovate to build competitive advantage and this sense of urgency has led to the focus on Fintech we are witnessing first-hand,” he added.

Digital transformation is the buzzword across the banking industry all over the world. And retail banks in the UAE and KSA are embracing the change and transforming their processes to keep pace with our consumer’s demands and expectations. - Ambareen Musa, CEO of Souqalmal.com

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25 % 22 %

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IN-DEPTH

Challenges heading to 2020

Changing customer behaviour is the single biggest driver in Asia impacting the retail banking market, twice as important as it is to the European market. What do you see as having the biggest impact on retail banking in the Middle East?

Jean-Paul Mergeai, Managing Director of Temenos Middle East discusses technical issues that the market can expect in the retail banking space

Jean-Paul Mergeai

n March 2016, Temenos commissioned The Economist Intelligence Unit (EIU) to produce an exclusive paper on the Future of Retail Banking. The EIU, on behalf of Temenos, surveyed 203 global banking C- level and boardlevel senior executives, to investigate the challenges and opportunities retail banks can expect to face in the years to 2020 and how they are responding. The results were brought together in a thought-provoking paper which captures the issues facing retail banks around the world, from their own perspective. The Middle East retail banking market is in a period of exciting growth and development. To complement the EIU report, Temenos has gathered more local insight through an interview with Jean-Paul Mergeai, Managing Director of Temenos Middle East.

Millennials now form

There is a lot of market disruption happening in financial services mainly driven by the emergence of new and innovative technologies and this is impacting retail bankers in the Middle East as it is across the globe. Millennials now form 40 per cent of the Middle East’s population and are a great driving force behind change in the retail banking market—this demographic are very tech-savvy and view digital interactions as the norm whether it be for online shopping or managing their finances. Interestingly the Middle East is also seeing a rise in the use of digital channels by the not so young consumers too. The potential for digital banking in the Middle East is now massive as internet penetration and smartphone adoption is rapidly increasing. The challenge for banks is how to differentiate their mobile and online offerings to acquire new customers and then to retain them. One behavioural change is that of loyalty, or indeed lack of it, to one financial services provider—today’s consumer will typically have more than one provider and sometime multiple providers. So banks have to make the customer value propositions compelling both in terms of the user experience cont. on page 70

of the Middle East’s population and are a great driving force behind change in the retail banking

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they provide and the relevance and timeliness of the products and services they offer. To do this banks need to better understand their customers and almost predict what the customer wants before they realise they need it through leveraging their data to become far more customer-centric. They need a strategy in place that can embrace on emerging technologies to drive innovation for competitor differentiation and speed to market.

Peer-to-peer lending is the biggest non-traditional entrant that banks believe will be their biggest competition in the years to 2020—do you feel that this is a true representation of what is happening in the region?

Regulations in the Middle Eastern banking industry are still very much protecting the banks from the nontraditional entrants. However, banks can’t rely on this forever. We are already seeing some fintech lending companies who have started their operations two years ago in the UAE gaining grounds given their win-win model. They provide an alternative investment opportunity for the mass whilst providing capital for SMEs—all with less complications that the banking sector requires businesses to go through for funding. There are also a number of crowdfunding websites that are operating in the region; the more these peer to peer lending companies improve their customer experience [which is probably easier for them to do than a bank whose systems and operations are entangled] the more it won’t be long that the mass will realise that banks are not their only option of source of funds. Peer-to-peer payments is not unheard of either—however, the regulators are still ensuring that banks are part of the ecosystem. For example, the Central

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Bank of Egypt recently declared that they are working on drafting a law governing international money remittances via mobile phone payments from overseas. The proposed law will allow Egyptians abroad to transfer money to their relatives who own a mobile banking wallet that is however owned by a local bank.

Thirty five per cent of senior banking executives interviewed said that ‘adapting the role of the branch network’ is a top priority in the year 2020— do you have any examples of where you can see investment in this from the Middle East? Middle East banks are definitely investing more in their branch networks. For example, Sharjah Islamic Bank is continuing to expand its branch network from what was

For example, in Saudi Arabia you can walk into a bank branch, open an account and be handed your bank card in that same visit. Customer experience is a large focus across the region. This is where digital marketing and channels are having a large impact on customer service. But the digital revolution is not a replacement for bricks and mortar—it’s complementing it.

Data management was cited as the largest area that banks were focusing on with their digital investments. Do you agree with this trend in relation to the region?

Absolutely. This trend is also echoed in the Middle East. There is growing realisation among banks that they need to capitalise on the data that runs through their systems. What to make

The challenge for banks is how to differentiate their mobile and online offerings to acquire new customers and then to retain them. - Jean-Paul Mergeai, Managing Director of Temenos Middle East

20 branches to 70 over the next two or three years. Other banks, such as Emirates NBD, the largest bank in the UAE, continues to promote the fact that it has the widest branch network in the UAE, stating that you can find a branch within a few kilometres of where you are at any point. To a large extent, retail banking’s success continues to be measured in how extensive their branch network is. Having said that, branch networks are not just expanding but they are also adapting or evolving to provide much improved levels of customer service and financial advice rather than just acting as transaction centres.

of it and how to efficiently integrate and incorporate this as part of digital strategy—are areas that we have been always been asked to consult and advise our banking customers on as technology leaders in this space. We are enabling them to dissect their data efficiently, advising on which part to archive and which one to act upon in real-time hence affecting the bank’s customers’ experience. I believe that appointing a business owner for managing a bank’s data is one way for a bank’s strategy to reap the benefits they are after. This mind-shift in how data is managed is something that we are yet to see here in the region.

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TECH FOCUS

BCG believes that it is imperative for banks in the UAE to embrace digital solutions

he city of Dubai is currently in the throes of a colossal transformation, one designed to accelerate its metamorphosis from a global, modern metropolis into a full-fledged, digitally-connected, and human-centric Smart City. In recent years, the Dubai government has taken giant leaps towards bringing to life its utopian Smart City vision, a multi-phased initiative founded on three principles— communication, integration, and cooperation—and intended to catapult the Emirate into one of the world’s most digitally-connected and sustainable cities. The Dubai government first began charting its path to Smart City status in 2013 and today, it is inching closer than ever to its end-goal. A major contributor to this? The creation of a comprehensive digital ecosystem—replete with a robust, scalable information and communications technology (ICT) infrastructure—that focuses on resource efficiency, promotes environmental sustainability, and more importantly, boosts customer happiness on every front and across key industries. Make no mistake: innovative, cuttingedge digital technologies have, without a doubt, laid the foundation for Dubai’s Smart City narrative and set the tone

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(Photocredit: ra2studio/Shutterstock.com)

‘Smart’ banking— the way forward Why is ‘digital’ the only way to go in the new age of customer satisfaction? Massi Markus, Partner and Managing Director at Boston Consulting Group Middle East, explains

for an all-new level of customer service excellence. And so, in line with this, practically every major sector in Dubai— from public transport and utilities to e-government and e-commerce—has, in the last couple of years, and in some form or another, succumbed to the unrelenting forces of the digital wave.

One sector that is, surprisingly, still lagging behind in this regard, however, is banking. According to The Boston Consulting Group’s (BCG) recent survey of corporate banking customers worldwide—the results of which are detailed in a report titled Digital in Corporate Banking Reaches the Tipping Point*—no bank in the UAE or Saudi Arabia currently provides online customer service chat capabilities or online business intelligence and analytics tools to their corporate banking customers—services that have become widely prevalent in other markets. In parallel, our data shows that over half of customers in those nations are willing to switch and move to a banking partner capable of offering high-value, digitallyenabled services. A staggering 80 per cent of are also willing to pay for access to the services offered.

* BCG surveyed 660 companies in 13 developed and emerging markets and 23 industries. A total of 1,112 respondents from 14 countries—including the United Arab Emirates, Saudi Arabia, France, Germany, Poland, the UK, and the US— were surveyed. Massi Markus

Source: BCG

cont. on page 74

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C C C M M M Y Y C Y CM CM M CM MY MY Y MY CY CY CM CY CMY CMY MY CMY K K CY K CMY

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TECH FOCUS

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The fact is, thanks to digital champions such as Apple and Amazon, consumers in the UAE are fully accustomed to interacting with businesses online. Techsavvy audiences in the UAE do not just crave a personal, adaptive, end-to-end digital experience, they expect it across the board. In short: digital is reshaping customer expectations and there is no way around it. With this in mind, we, at BCG, believe that there is an imperative need for banks in the UAE to further embrace digital solutions: alarmingly, BCG’s study of corporate banking customers worldwide revealed that, over the next five years, digitally laggard corporate banks could see profits drop by as much as 15 to 30 per cent relative to digitally fast-moving competitors. Without question, adopting a bold online multichannel strategy could translate into higher levels of customer satisfaction and happiness— the latter which forms the very crux of Dubai’s Smart City initiative. The reality is, there is significant opportunity for corporate banks in the UAE that are serious about advancing their own digital strategy. BCG’s modeling actually shows that three distinct digital customer-centric value propositions have the potential to deliver substantial performance and revenue benefits. First and foremost, there is seamless online banking, which relies on a holistic online platform that is easily accessible, navigable and improves customer experience, loyalty and advocacy. It is a baseline level of service with core capabilities that include single-sign-on processes, credit preapproval, hassle-free integration across devices and channels, easy virtual access to relationship managers, and straight-through processing of routine tasks to push as much functionality as possible to the client, with the fewest number of clicks. At the same time, this model makes it easier to cross-sell and upsell products as well as streamline back office operations.

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The second digital proposition is enhanced digital advice, a model that turns data into targeted advice to improve client service and retention while generating significant new revenue sources. Thanks to a broader and digital-based set of products, this model improves banks’ product proposition, risk assessment process, and sales efficiency when it comes to cross-selling and upselling. The third and final model is real-time decision making. Here, the focus is on robust analytics and decision-making tools—such as those that facilitate automatic reconciliation—to help clients generate needed information faster and make real-time adjustments to improve working capital and cash management. By leveraging the digital platform to strengthen their relationship with their customers, banks can drive better risk assessment, enhanced product proposition, and streamlined operations. All in all, however, for banks in the UAE to successfully implement these

three propositions—which can be built on top of each other or developed independently—and achieve even the most basic level of digitisation, they must lay out a clear vision predicated on their current level of digital maturity. It also requires a sustained commitment to redesigning systems and processes: simply adapting technologies to the current banking environment will not work. This may seem to be a tall order, but it is less daunting when broken into phases. Globally, first movers have already demonstrated that digital offerings can sharply improve the quality of client service. With the development of Dubai’s Smart City initiative in full swing, banks in the UAE need to respond quickly to this digital call to action. They could be seeing results—and a stark increase in customer satisfaction levels—within nine to 12 months. And, given the fact that the digital transformation is evolving at warp speed, time is certainly of the essence.

The following guidelines can help leaders plan their approach:  Set a clear strategy. Management consensus on the desired digital positioning is essential. Success requires alignment, commitment, and investment across leadership ranks.  Establish a baseline. Understanding which capabilities are required at each stage of growth is key to formulating a realistic and measurable implementation plan. Those capabilities should be mapped to the organisation’s current digital capabilities.  Build the business case. Assessing the digital opportunity requires analysis, benchmarking, and scenario modeling to determine the required level of investment, profit potential, and impact on key financial ratios.  Align the organisation and culture. Digital needs to be seen less as a channel for pushing through traditional banking products and more as the core around which new banking and customer-facing initiatives are developed. Based on this, UAE banks need to reshape organisational priorities, reporting chains, and performance incentives. Source: BCG

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TECH FOCUS

Perfecting Islamic banking software solutions Ashar Nazim, Partner, Global Islamic Banking Centre, EY highlights that efficient Islamic banking software products is crucial to expanding a bank’s market share

t the heart of any banking operations, the software plays a fundamental role in entailing operational efficiency. Islamic banks are expected to make appropriate investments in bestin-class software with Islamic capability with components covering business process modelling, compliance and risk management tools that would enhance banks’ profitability and performance, thereby passing the benefits indirectly to the end-customers of Islamic banks. The software used by Islamic banks needs to be fully compliant with the tenets laid down by Shari’ah and should also support operational efficiency. Recent analysis by EY indicates that Islamic banks have experienced a decline in profitability and their average return on equity (ROE) lags behind that of conventional banks by 20 per cent. Operating expenses are also 50 per cent higher for Islamic banks. Falling oil prices have further aggravated the situation, as banks are under extreme pressure to cut costs and become more efficient. With the usage of wide-ranging transformation programmes, that include digital transformation, the profit pool of Islamic banks could potentially increase by 25 per cent.

(also known as Islamic core banking system) has entailed several existing and new players joining the software arena. In terms of Islamic banking, such systems can be categorised under two groups: 1) modular software with Islamic banking capability—these are the software which have an existing capability to support conventional banking. The module to support Islamic banking is developed over the conventional part of the system; 2) pure play software with Islamic banking capability, systems developed only to serve Islamic banks.

THE ISLAMIC BANKING SOFTWARE MARKET

The growing demand for tier 1 software that has Shari’ah compliant functionality

76 page 76-78 Tech Focus.indd 76

Ashar Nazim

There has recently been significant improvement in the level of participation of governing bodies, senior executives from banks and certain tier 1 software vendors (which offer solutions with Islamic banking capability) to reinforce the Islamic banking solution capabilities and bring synergies into the Islamic banking landscape. With the sharp increase in asset shares within Islamic banking, sophisticated systems with Islamic banking capability is definitely the need of the hour.

LACKING ATTRIBUTES

Though relatively in its nascent stage, Islamic banking has witnessed fast growth and technology has been instrumental in this leap. There has been significant investment in the application of technology in the realm of Islamic banking but there have been challenges, partly due to the relatively complicated processes (emanating from Shari’ah tenets) and due to the varying interpretations of some of the Shari’ah principles in different parts of the world. Some of the typical challenges with the software used by Islamic banks include: 1) akat computation, automatic calculation of akat thereby placing onus on the software to make these intricate calculations; 2) non co-mingling of funds for restricted deposits, where the customer demands that their investment cont. on page 78

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should only be utilised under a particular project with the returns to be channelled specifically without co-mingling the returns to the other set of investments; 3) distribution of loss, where distribution of losses becomes a complicated process involving computation, allocation and distribution, and due to the complex nature of this process as well as the incapability of several software to comply with Shari’ah tenets, this is typically performed outside the software through manual methods; 4) facility rescheduling and restructuring, where the ‘selling price’ in a financing portfolio restructuring should not be changed in a contract, thereby making rescheduling and restructuring tricky, especially when same contract is supposed to be used; 5) compensation charges for late payment, where the software used should be flexible enough to accommodate variations in the interpretations across different geographies.

ISLAMIC VS. CONVENTIONAL BANKING SOFTWARE

The key differences between software that has Shari’ah compliant functionality and conventional software are the fundamental differences between the two banking systems. They include: 1) concept of money and basis of transactions, whereas in conventional banking treats money as a medium of exchange and a store of value, Islamic banking money is a medium of exchange where the value of money is equal to that of its face value and does not consider time-valueof-money invalidating the principle of interest; and 2) relationships with clients and customers, where conventional banking results in guaranteed principal and earning of fixed amount of income while Islamic banking forms relationships on the basis of partnerships operating on the basis of profit and loss sharing.

78 page 76-78 Tech Focus.indd 78

Software solutions used by Islamic banks have to fully comply with the fundamentals above for all its business process transactions. Differentiating principles such as profit and loss distribution, management of charitable income, segregation of funds, handling of akat, right accounting treatments, complex reporting and prevention of prohibited transactions, have to be inherently adopted in the software.

OUTLOOK

Leading Islamic banks have done well to mainstream with a competitive, sieable business in their home markets. Analysts however, also point out that the return on shareholder equity could be significantly enhanced, by at least 15 to 20 per cent, and this need becomes more pressing in the context of the prevailing macroeconomic environment. The next big opportunity is for Islamic banks to regionalise. But the challenge is this has to be done in the context of lagging industry infrastructure that could potentially put shareholder value at risk.

Fortunately, the progression of fintechs and the digitisation of banking business means that banks will have to completely reinvent their business model. The future of retail banking in emerging markets is an enhanced smartphone experience. Islamic banks need to focus on a few high-impact opportunities: payments, mortgages and small investment accounts appear to have the highest payoff. The boards of most of the 40 systemically important banks have been generous in sanctioning spend on digital initiatives—between $15 million and $50 million over next three years— well aware that inaction could cost up to 50 per cent of their retail banking profit in next few years. The bigger challenge is the implementation of the digital strategies. The industry today is yet to reach 100 million customers. The potential captive market is six times bigger, but requires a different banking model. A digital-first strategy has to be the stimulus for Islamic banks to sign up the next 100 million customers over the next decade. This exciting journey is only just beginning.

Islamic banking software solutions should incorporate the following key features:  Shari’ah compliance—the system should be able to cater to the entire spectrum of product offering of an Islamic bank and has been subjected to a thorough Shari’ah audit exercise. Flexible and scalable system to accommodate varying Shari’ah interpretations—parameter driven structure along with user-definable codes to enable the system to easily accommodate varying Shari’ah interpretations (for different jurisdictions).  AAOIFI and IFSB compliance—software should be fully compliant with accounting standards for Islamic financial institutions as prescribed by AAOIFI and risk management and capital adequacy standards set by IFSB.  Capability to compute akat—charity as well as profit loss distribution.  Accurate accounting entries—detailed accounting entries required by the purchase and sale elements of Islamic financing to reflect the ownership of property. Source: EY

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Catching a cyberthief

To deal with these new levels of cybercriminality, one must know what to look for, how to look, and where to look.

(Photocredit: Olivier Le Moal/Shutterstock.com)

CYBERCRIME

Simon Goldsmith, Director for BAE Systems’ Cybersecurity Commercial Sectors in the Middle East writes on how to enhance cybersecurity

s with all criminal behaviour, cyberattacks are not invisible—they leave tracks. But the traditional technologies that are deployed to prevent, detect and respond to cyberattacks are struggling to keep abreast of the threat. Many detection solutions are overwhelmed by the massive volumes of data that modern networks generate and cyberattacks regularly make news headlines. However, a fusion of modern ‘big data’ technology and domain expertise has enabled network defenders and law enforcement to develop the tools necessary to automatically and rapidly detect anomalous network behaviour, and take on modern cyberthreats.

SO WHAT’S HAPPENING?

There have been well publicised incidents targeting businesses in the last few years where a financially motivated attack has been enabled by sophisticated cyberespionage techniques. This convergence between traditional financial crime and cyberespionage tools has resulted in some businesses, and their customers, losing large amounts of money. Typically attacks take two forms—the first uses covert and highly

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targeted social engineering techniques to maximise the chances of the attack staying undetected until the target ‘payload’ is converted into money quickly and efficiently, often across multiple countries; and the second uses more complex malware which can adapt itself to avoid detection thereby increasing scale, distribution and ratios of success.

BETTER DEFENCE

Why do so many financial institutions still find themselves the victims of successful

cyberattacks, in spite of many layers of protection and significant investments in cybersecurity? Partly this is explained by criminals continually innovating and finding new ways to circumvent defences and law enforcement disruption. Also, most security protection and monitoring technologies are programmed to only recognise and alert on attacks by correlating activity against rules and signatures that indicate a known threat. Unfortunately attackers are now organised, and have created a professional

DRIDEX: UK, Italy and UAE banks fall victim In September 2015, arrests were made against the suspected authors of Citadel and Dridex, two banking malware families that had been among the top crimeware threats. Dridex is a banking Trojan that made its first significant appearance on the threat landscape in July 2014. Since then, Dridex rose to become one of the top cybercriminal botnets, impacting organisations globally but with a strong focus on the UK, Italy and UAE. It is likely the criminals have both a good understanding of the online banking systems in these countries, but also how to cash out stolen funds through local affiliates or money-mules. During its period of greatest activity, the Dridex actors gained a considerable amount of data and leveraged those details for over GBP 20 million in the UK alone. Source: BAE Systems

cont. on page 82

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CYBERCRIME

cont. from page 80

supply chain including malware which is able to outpace both network defenders and law enforcement. Additionally, even when security devices detect an attack and generate an alert, analysts cannot interpret the alert for what it tells them, or are too swamped with alert volumes to process and respond to it.

DETECTING AND RESPONDING TO THE THREAT

To deal with these new levels of cybercriminality, the first step is to look for it. You must monitor your network and the activity on it and capture and record that data in such a way that you can then examine and interrogate it. This may sound easy, but when you are dealing with massive volumes of ‘Big Data’—all of which come in different shapes, sizes and formats, the challenge is to record and store that data in such a way that it is then easy to retrieve, search and query it. But that in itself is not enough. You also need to know what to look for, how to look, and where to look. Finally, when you find something, you have to be able to interpret what you see. Not all ‘suspicious’ cyberactivity is malicious: a lot of activity is benign or ‘normal’ even though it may fall under the spotlight of activity which could be indicative of a cyberthreat. Therefore, when automatically analysing massive data sets, additional intelligence needs to be built into the analytics to enable the solution to determine whether observed behaviour is truly indicative of a threat or is actually normal within the context of that network and the business operations it supports. Otherwise these ‘false positives’ mean you could end up spending valuable resources chasing down one threat which is actually innocent, while another more potent threat goes un-investigated. Moreover, as the analysts who work in security operations centres will testify, information overload is not just down to false positives.

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To catch a thief, you have to think like a thief and with good intelligence on the threat, you can develop threat models which predict attacker behaviours.

- Simon Goldsmith, Director for BAE Systems’ Cybersecurity Commercial Sectors

Their work often requires use of multiple security tools at once, necessitating the transfer or exchange of data from one system to another and often back again. Obviously this lack of efficiency reduces the effectiveness of any investigation, but the true impact is more significant. This time lost switching between systems and the disruption to the analyst’s thought process means that less time is spent on investigating alerts. Alerts may not be investigated and mistakes might be made. An attack could be successful even if it has been alerted upon.

THE SOLUTION IS OBVIOUS, BUT NOT SIMPLE

Security operations need to be brought together and integrated into a single workspace where all data, security alerts, threat intelligence and enrichment data can be accessed, managed, viewed and investigated and where the results of investigations can be quickly shared with those who need them. The good news is that the underlying technologies are now either commodity or open source. A more significant challenge is in fusing that technology and applying domain expertise—that is to say, you need to train the technology for it to be able to do something intelligent. As recent cyberattacks show, we must also recognise that security is not a solitary endeavour. Sharing information with peers and partners in the security industry can offer significant and

rapid benefits: accelerating your development, reducing your risk and ultimately making everyone safer in the fight against digital criminals. To catch a thief, you have to think like a thief and with good intelligence on the threat, you can develop threat models which predict attacker behaviours. Basing analytics on these behaviours rather than signatures and rules means the attacker has to fundamentally change every aspect of their attack to evade detection. Finally, presenting a rich contextualised view of an incident within a well-orchestrated workflow gives the security analysts the information they need to drive an investigation to a conclusion as rapidly and accurately as possible. Together, these three capabilities shift the advantage back to the defenders.

Success lies in three fundamental areas, all based upon scalable: 1. Threat intelligence management—ingesting and managing multiple threat intelligence sources, enabling you to quickly transform intelligence into actions that enhance defences; 2. Threat analytics—using behavioural analytics to analyse data on a massive scale and automatically detect threats. With fewer black or white rules and not requiring known signatures, this approach is more resistant to threats changing their methods of attack; 3. Threat investigation—enabling analysts to triage, investigate and manage alerts, before recording their work in a ticket management system and sharing their conclusions with peers. Source: BAE Systems

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CYBERCRIME

Economic crime—an ongoing concern in the Gulf PwC highlights alarming levels of concern for awareness of cybersecurity in the Middle East markets

ybercrimes across prominent markets in the Middle East are not showing any signs of improvement. Although combative measures are said to have been taken to reduce exposure to such risks, it seems that there is no clear indication of reduced levels in the region and globally. According to the PwC Middle East Economic Crime Survey for 2016, 26 per cent of organisations in the region have experienced economic crimes in the past 24 months, lower than the global average of 36 per cent, though a five per cent increase since 2014. Although the number of affected organisations in the Middle East was lower compared to the global average, the number in the region who simply didn’t know if they’d been a victim was much higher than the global average (20 per cent against 11 per cent), indicating uncertainty as to whether their organisations are experiencing economic crime. The survey found that even though there was a marginal decrease, it is possible that this small decrease is actually masking a worrying trend—that economic crime is changing significantly, but that detection and controls are not keeping up with the pace of change. In addition to that, the financial cost of each fraud is on the rise. “The challenge for businesses is to close down the opportunities to commit economic crime. A major part of this

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is staying ahead of new threats, while developing new ways to prevent, detect and respond effectively to those threats. It’s also vital to ensure that organisations have a culture based on strong values, supported by robust policies and ethics and compliance programmes. This needs to be integrated into day-to-day decision-making to be successful,” said Nick Robinson, PwC Regional Forensic Services Leader. According to the survey, one in four organisations have not carried out a

single fraud risk assessment in the last 24 months, while 17 per cent are discovered by mere accident. This suggests that organisations need to ensure that they are not lulled into a false sense of security if the level of reported incidents are low and that they revisit their fraud detection mechanisms. However, on a more positive note, the survey highlights that the role of internal audit in detecting fraud has been more effective compared to how it was in 2014, despite it being slightly below the global average.

SURVEY: Participation by region

7% Iraq

Jordan

26% Qatar

Bahrain

SURVEY: Participat

25% KSA

30% UAE

Oman

Source: EY

cont. on page 86

Some bonds are too strong to break.

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CYBERCRIME

cont. from page 84

In regards to cybercrime, 30 per cent of organisations have been affected so far and 39 per cent think they will be affected in the next two years. Cybercrime remains the second most reported economic crime. Most companies are still not adequately prepared for or even understand the risks faced—only 33 per cent organisations have a cyberincident response plan. The report also found that a fraudster in the Middle East is most likely in middle management (29 per cent) or a junior role (46 per cent). Types of fraud more prevalent in the region include misclassification of payroll expenses, false wage claims and fraudulent reductions in payroll taxes. According to the survey, more than 20 per cent of financial services firms have not conducted risk assessments across their global footprint. However, respondents in the region appear to be ahead of the curve in many areas and in the last two years, 68 per cent have hired additional resources in this area. PwC further found that more than one in five respondents are not aware of a formal ethics and compliance programme, even though 79 per cent companies claim to have a formal plan in place. The report also suggests that a good compliance programme should be embedded in the human resource processes in order to combat economic crimes and that, if done well, this approach can reduce such cases, as well as protect the brand and reputation. An interesting deduction made from the survey results was that 92 per cent of the respondents in the Middle East said that they don’t see bribery as a legitimate practise in their organisation, and 83 per cent of them saying they would rather lose a sale than pay a bribe. While only six per cent said that they’ve been asked to pay a bribe in the last two years, and only nine per cent say they lost business to a competitor as a result.

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organisations have been affected by cybercrime and

and

think they will be affected in the next two years

Nevertheless, according to Transparency International’s Corruption Perception Index for 2016, a number of the major economies in the region have made progress in this area, with the ratings for Kuwait, Jordan, and Saudi Arabia all improving slightly. There has been little progress elsewhere in the region, in countries such as Egypt, Libya, Morocco, Syria, and Tunisia which have deteriorated slightly, and three of the bottom ten countries are from the region, namely Iraq, Libya, and Sudan— all of them countries that are affected by conflict.

The challenge for businesses is to close down the opportunities to commit economic crime. A major part of this is staying ahead of new threats, while developing new ways to prevent, detect and respond effectively to those threats.

- Nick Robinson, PwC Regional Forensic Services Leader

Has your organisation experienced any economic crime within the last 24 months?

26%

Yes

21% 54%

66% 20%

Don’t know

13% 0

2016 Middle East Source: EY

2014 Middle East

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PERSONALITY

Mazen Boustany Partner at Baker & McKenzie Habib Al Mulla

Boustany believes that law is one of these professions where intellect plays an important and essential role.

I have been working as a lawyer since August 1996. I was working for eleven years simultaneously in a law firm and in a major development company as a legal consultant, focused on corporate finance and corporate matters. I wanted to go into politics and in fact majored at university in both law and political sciences. Since law and politics are intertwined, I felt it only made sense that I study law and start practicing as a lawyer before shifting into politics. I also presented myself to a local municipality elections in Lebanon in 2004, but I lost the elections and I do not feel the desire to reiterate such an experience, at least for the time being. I believe that one of my biggest achievements thus far is to be considered as the go-to lawyer for some of the UAE Governmental entities and more particularly the UAE Ministry of Finance, the UAE Central Bank and the Emirates Securities and Commodities Authority, as well as the consultancy firms that pitch for projects with these entities. This at least gives some reassurance that sometimes hard work and dedication are recognised and rewarded. I start my day checking out and replying to e-mails, then start working on my current projects. Such focus is however interrupted, either by urgent e-mails or urgent solicitations from colleagues. Such interruptions—call it multitasking or a loss of attention span—are, I believe, a fact of our connected lives and we will have to deal with this more and more in the future. I remember when I was a trainee, some senior lawyers faced with some urgent and important submissions would lock themselves up and refuse to be interrupted or take any calls. I believe such behaviour is a thing of the past as we are today interrupted by e-mails and phone calls, and things can only get worse from here with the wearable devices. I am an avid reader and thus read several books simultaneously. I am currently finishing the Financial Times-

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Goldman Sachs book for this year, The Rise of the Robots, where the author Martin Ford develops the thesis that the future and the advance of technology is not only a threat to low paid workers—blue collar workers, paralegals etc.—but eventually also to high end workers as well. I also read a lot of novels, mainly in in French. One of my favourite business books is Fooled by Randomness by Nassim Nicholas Taleb, the author of Black Swan and Antifragile, which I have also read, but the first one was a revelation to me, as Taleb develops the thesis that we cannot predict the future by relying on the past, especially not in financial markets, and that a lot of self-sufficient traders do not know what they are talking about, which is why we have a major financial crisis every 10 years. Apart from reading, I play tennis and football. The current financial markets and banking industry are going through upheaval, only worsened by the introduction of fintechs (disruptive technologies as those are being dubbed), so financial markets and banking industry will have to play catch up on two fronts. But the regulators are aware of these facts and are managing the best way they can with the assistance of consultants and law firms to bring best international practises to the forefront. However, there are a lot of uncertainties fueled by the price of oil and the geo-political instability. I believe that the uncertainty fueling regional markets is also fueling global financial markets, with the exception of the US probably. However, in Europe, there are a lot of uncertainties, the job market is still fragile, and they have not yet recovered from the last financial crisis. In addition to that, Europe is heavily affected by what is going on in the Middle East, of which the massive emigration to their shore is a part. Too much media access and news may also be playing a negative sentiment, as currently, good news are scarce. I also read somewhere that we are today exposed in one day to as much news as a person from the 15th century would have been exposed in his entire life.

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LAST WORD

Jon Conner Middle East Market Manager, J.P. Morgan Private Bank On the financial landscape of the GCC What services does J.P. Morgan provide? J.P. Morgan uses an integrated team approach to private banking that includes bankers, investors, capital advisors and wealth advisors. Typically, the banker is the primary point of contact with the client and the other team members are brought in as appropriate to best serve the clients’ needs. An investor helps define and execute an investment strategy for the client. The capital advisor reviews a client’s balance sheet to determine if credit would be a valuable part of their strategy. Finally, a wealth advisor helps to evaluate the client’s trust and estate planning needs.

Which areas does the company seek to focus on this year? Our goal is to continue our focus on helping ultra-high-net-worth individuals with investment, credit and wealth planning needs. Our clients, many of which have been with us for multiple decades, span the GCC region and have a wide range of business and personal requirements that we help them plan for and manage.

What do you think is your greatest success in your career? Having managed client relationships with families in the Gulf for many years, being asked in 2013 to lead J.P. Morgan’s Middle East wealth management business was one of my proudest accomplishments.

What are your hobbies? I love downhill skiing, ski touring, swimming, tennis and cycling.

What does your day-to-day job entail? I manage a team of 58 people who sit in Geneva, London and Dubai. My day begins with our daily morning meeting, where J.P. Morgan economists, strategist and specialists speak about what happened in overseas markets overnight, what today’s futures markets tell us, and how it all fits in with our current views and themes we are monetising in client portfolios. Then, I may have a client or prospect meeting or lunch, attend a regional management committee meeting with my cross lines of business partners that cover the MENA region, interview a candidate for a client advisor role, review risk and controls within our region. In short, some of my day-to-day is structured, but most of the day can also be unpredictable.

What is your favorite book? Lincoln, by David Herbert Donald, which shares the life and presidency of the 16th United States President, Abraham Lincoln, a man who rose from humble beginnings as a lawyer from rural Kentucky to hold its young nation together during a civil war that tore through the fabric of its society.

What do you think is the biggest weakness of the GCC’s banking and finance industry? As the economies and populations of the GCC grow, there still has not been any significant cross-border bank mergers or acquisitions of any significant scale across the GCC. For the GCC banking sector to be able to complete on a global scale, I do think that the emergence of a sizeable GCC financial institution that has scale and global reach to support the growth of global domestic industries such as energy, hospitality or transportation is needed.

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Who would you like most to have dinner with? Abraham Lincoln.

What is your outlook on the GCC market over the next year? It is no secret that the decline in oil prices has had negative top-line impact for many countries and businesses in the region. We see oil as stabilising between $40 and $45 per barrel by the end of the year. Clearly, the decline in countries’ oil revenues in the region has had negative repercussions on businesses that are reliant on government spending. We firmly believe that to create the safest investments for our clients, they need to be diversified away from having too much financial exposure to any one business or region. History teaches us that diversifying your assets away from concentrated exposure to a single region, business or investment is the key to maintaining long-term wealth.

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