#181 - February 2016 by CPI Financial

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FEBRUARY 2016 | ISSUE 181

Saudi Arabia: life after oil

OPEC outlook 2016: energy exporters perspective

‘You had me at Abu Dhabi’

Building a booming sector

Facing the ﬁntech disruption

Dubai Technology and Media Free Zone Authority

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CONTENTS

FEBRUARY 2016 | ISSUE 181

Editor’s Letter

News analysis GCC sovereigns lose ground, Islamic banking shows promise

News round up

MARKET WATCH 8 Banking on wealth 10 OPEC and the oil price 12 OPEC outlook 2016: energy exporters perspective LEGAL FOCUS 16 Egypt introduces a Secured Transactions Law for the first time

COUNTRY FOCUS 18 KSA country report PRIVATE BANKING 24 ‘You had me at Abu Dhabi’ ECONOMIC OUTLOOK 30 GCC economies cloudy FEATURES 34 GCC BANKING

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| ISSUE 181

JANUARY 2016 | ISSUE 180 FEBRUARY 2016

| ISSUE 179

Saudi Arabia: life

JANUARY 2016 | ISSUE 180

| ISSUE 181

DECEMBER 2015

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FEBRUARY 2016

after oil

View from the top Mashreq CEO AbdulAziz Al Ghurair

| ISSUE 179 UNB looks to the Mohammed future UNB CEO

Saudi Arabia: life after oil

“In order to have a satisﬁed customer you need to have a satisﬁed employee.”

Nasr Abdeen

View from the top

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Qatar

GCC

TALKING HEADS their belts UAE banks tighten

Rate hike likely to impact the GCC

UAE banking faces a tough road ahead

What does the lifting of sanctions really mean?

Zone Authority

ENT WEALTH MANAGEM

and Media Free

COUNTRY REPORT

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Knowing your customer is essential

OPEC outlook 2016: energy exporters perspectiv

‘You had me at Abu Dhabi’

Building a booming sector

Facing the ﬁntech disruption

Dubai Technology

Georgina Enzer

Managing Editor

and Media Free

Zone Authority

med Nasr Abdeen UNB CEO Moham

PLUS:

Dubai Technology

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Dubai Technology and Media Free Zone Authority

Mashreq CEO AbdulAziz Al Ghurair

UNB looks to the future

k.com)

Breaking away from oil

(Cover credit: Fedor Selivanov /Shutterstoc

DECEMBER 2015

his month’s edition of the magazine has quite a heavy focus on oil, with good reason. The oil price fluctuation is at the forefront of many a banker’s mind as it determines the success or failure of not only oil businesses, but entire economies and small and medium business providing services to the oil and gas sector. To demonstrate the affect the oil price is having, Shell is cutting 10,000 jobs globally, while here in the UAE the oil and gas sector, as well as the construction sector, appears to be hard hit, with many people being made redundant. A women’s group on Facebook is now seeing ladies posting daily asking if anyone has jobs for their husbands in those sectors, as they have recently been made redundant. We kick off this issue with comment from the people that know: the most recent President of OPEC, HE Dr. Emmanuel Kachikwu, Nigerian Minister of State for Petroleum Resources and HE Suhail Al Mazrouei, Minister of Energy UAE who spoke at the recent Gulf Intelligence UAE Energy Forum (pg. 10 to 14). In a follow on from the oil price theme, we have a very interesting country focus featuring Saudi Arabia, looking at the energy subsidy cuts, the policy reforms and the need to diversify away from oil, which is now becoming an essential move rather than a long-term plan (pg. 18). Furthermore, we get an exclusive look into ADCB’s new private bank, what it’s doing and where it sits in the market (pg. 24). In another theme that runs through this issue, Islamic banks seen to be weathering the economic storm a little better than their conventional partners. Our news analysis on page six briefly looks into this, then we go a little deeper in our feature on Islamic banking software (pg. 40) and what is needed. It seems like Islamic banks and the Islamic banking sector are rapidly growing and developing and may just be the place to keep your money and invest. We then briefly delve into the problem of fintechs for the banking sector and how banks can protect their revenue streams (pg. 60), an interesting read. This will be the final Banker Middle East with me at the helm as we welcome a new editor from 1 March and I return to being just the Managing Editor. I hope you enjoy this issue.

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CONTENTS

FEBRUARY 2016 | ISSUE 181

ISLAMIC BANKING SOFTWARE 40 Building a booming sector AML REGULATION 46 European Commission looks at toughening AML regulations

VAT 50 VAT looms in UAE

COMPANY PROFILE 62 Background on Bank of Sharjah-

Commerzbank partnership

TECH FOCUS 64 The undeniable ripple effect 68 To catch a cyber thief PERSONALITY 72 Rola Seifeddine from the Access Bank UK

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

AWARDS 54 Qatar product awards IN-DEPTH 56 Facing the fintech disruption

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LAST WORD 74 Wayne Andrews, Managing Director,

Sales Director OMER HUSSAIN omer@cpifinancial.net Tel: +971 4 391 5419 EDITORIAL editorial@cpifinancial.net

ADVERTISING sales@cpifinancial.net

Editors SARAH OWERMOHLE sarah@cpifinancial.net Tel: +971 4 375 2527

Sales Director JON DESPRES jon@cpifinancial.net Tel: +971 4 433 5321

WILLIAM MULLALLY william@cpifinancial.net Tel: +971 4 391 3718

Business Development NIKHIL NIDHAN nikhil@cpifinancial.net Tel: +971 4 391 3717

JESSICA COMBES jessica@cpifinancial.net Tel: +971 4 364 2024 Contract Publishing Editor ISLA MACFARLANE isla@cpifinancial.net Tel: +971 4 391 3729

Treasury Tutor

Managing Editor GEORGINA ENZER georgina@cpifinancial.net Tel: +971 4 391 3728

Head of Contract Publishing & Business Development VINOD THANGOOR vinod@cpifinancial.net Tel: +971 4 391 3725

DANIEL BATEMAN daniel@cpifinancial.net Tel: +971 4 375 2526 MOHAMED MAKSOUD mohamed@cpifinancial.net Tel: +971 4 391 4680 LIAM O’CONNOR liam@cpifinancial.net Tel: +971 4 391 4680

Chief Designer BUENAVENTURA R. JALUAG, JR. jun@cpifinancial.net Tel: +971 4 391 3719 Creative Designer Senior Designer ANA MAKSIC FLORANTE MAGSAKAY ana@cpifinancial.net florante@cpifinancial.net Tel: +971 4 391 3724 Tel: +971 4 391 3723

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Checkt CPI Financial’s Jobs page

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NEWS ANALYSIS

Sovereigns slide but Islamic banking shows promise MENA markets take a hit in January on the back of the fluctuating oil price

iddle East and North African markets closed in the red for January 2016 on the back of low oil prices and economic instability. According to S&P’s Middle East and North Africa Sovereign Rating Trends overall sovereign creditworthiness in the Middle East and North African (MENA) region has dropped since its last report six months ago. According to S&P, the fortunes of MENA markets followed the oil price, with most indices recording a marginal recovery in the last two weeks of the month. Saudi’s TASI index slipped 21 per cent in January, before rebounding by close to 10 per cent, to close the month at 5,997 points. S&P lowered the ratings on both Oman and Saudi Arabia based on the sharp deterioration in their fiscal deficits resulting from the drop in oil prices and continued high levels of government expenditure. “We expect Gulf Cooperation Council (GCC) members to maintain their exchange rate pegs to the US dollar over the medium term. The ratings on Bahrain, Lebanon, Oman, and Saudi

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the amount Saudi’s TASI index slipped in January 2016 Arabia carry a negative outlook. The ratings on the rest of the region’s sovereigns have stable outlooks,” according to the report. The low oil price has had a knockon effect, particularly in the UAE, with the non-oil sector also taking a hit and seeing a slowdown in growth. According to Emirates NBD, this is not unexpected. “The slowdown in non-oil sector growth in the UAE over the last few months is in line with our expectations, as uncertainty about the economic outlook and low oil prices weigh on consumer and business sentiment, and as the strong US dollar continues to impact demand from emerging markets in particular. However, we expect the non-oil sectors to contribute positively to overall growth in the UAE this year,” Khatija Haque, Head of MENA Research at Emirates NBD, said.

CAPITAL IDEAS FOR BANKS

Islamic banks in the GCC are looking to increase their capital and raise liquidity through the issuance of Sukuk—an indication that the banks have been through a period of asset growth despite the economic turbulence of 2015, and are now looking to increase their capital to asset ratio. Kuwait Finance House is considering a capital-boosting Sukuk to increase its Tier 1 capital, Dubai Islamic Bank has also said it will need to increase capital during 2016 on the back of strong asset growth in 2015. Joining their ranks, Qatar Islamic Bank (QIB) said it will seek approval from shareholders at its Annual General Meeting in February to increase the maximum size of the bank’s Sukuk programme to a level of $3 billion from $1.5 billion. QIB’s Board of Directors is also recommending an extension of the approval of QAR 3 billion remaining from the Additional Tier 1 Capital Perpetual Sukuk. Saudi-based Bank Albilad is also planning to increase the bank’s capital by 20 per cent to SAR 6 billion through the issue of bonus shares at a rate of one share for every five held. The rapid growth in assets for Islamic banks that has continued unabated despite the oil price crash will likely lead many Islamic banks in the GCC to raise additional capital. According to ME Global Advisors, conventional banks in the GCC have seen slower asset growth which limits their need to raise capital at the moment. However, if loan losses pick up, they may also see pressure on their capital ratios and seek to return to capital markets. Islamic banks have better prospects for stronger asset growth going forward than conventional banks, meaning they are more likely to raise capital than their conventional partners, in an era of low oil prices. Islamic banks are currently showing far greater resiliency in the region than conventional banking, according to ME Global Advisors.

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ONLINE HIGHLIGHTS Visit www.cpifinancial.net to read all these stories and more news, features, blogs and videos.

Middle Eastern buyers invest $5.22 billion in European hotels in last 24 months

uyers from the Middle East region invested over $5 billion into some of the world’s best known hotels globally during the last two years, according to Check In, a European inbound hotel investment report by CBRE, a global real estate consultancy. The United Kingdom was the key target market for Middle Eastern investment, receiving $3.94 billion of Middle East outbound investment, followed by Italy and France, receiving $643.8 billion and $639.3 billion respectively. UK hotel investments included Claridge’s, The Connaught and the Berkeley in London’s Knightsbridge. The InterContinental Paris Le Grand was another iconic hotel snapped up by Middle Eastern investors, purchased by the Qatari sovereign wealth fund in 2014. “The Parisian market is experiencing an influx of international capital. As part of the Eurozone, Paris is seen as a secure place for investment and is the second priority, behind London, for international capital. We’re seeing a steady increase in interest from Middle Eastern investors in upscale and trophy assets, with a number of transactions taking place over the last 18 months. High net worth families and sovereign funds from Qatar are leading the pack,” said Catherine Rawanduz, Head of Hotels France, Belgium, Luxembourg, Switzerland. In March 2015, Qatar Airways completed the purchase of the four-star Sheraton Skyline at London’s Heathrow Airport; this was followed by the purchase of the Novotel Edinburgh Park—a midNick Maclean market operation.

RATINGS REVIEW Entity

LT IDR/LT Rtg (FC)

Qatar

Abu Dhabi

Ras Al Khaimah

Saudi Arabia Kuwait Israel

Bahrain

Lebanon Iraq

BBB-

B-

Under Review

Qatar

Saudi Arabia

United Arab Emirates Kuwait

OUTLOOK

Country

United Arab Emirates --WATCH

Israel

Bahrain

Lebanon Iraq

KEY

Positive Negative Evolving Stable

A QUICK WORD Regional outlook deteriorates

MENA region growth decelerated in Q3 2015 as the fall in oil prices took its toll on crude export-driven nations, while the economies that are less reliant on oil revenues managed to maintain their growth momentum. The region expanded 2.4 per cent annually in the third quarter, which was below the 2.8 per cent increase tallied in Q2, according to the FocusEconomics Consensus Forecast. The report showed that there was a sizeable economic deceleration in GCC countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates). However, most of the oil-dependent nations benefited from low crude prices. FocusEconomics foresees growth broadly stable at 2.5 per cent in Q4. The main factors that caused oil prices to decline last year remain and weaknesses carried into 2016. Strong supply from key oil producers in an attempt to retain market share or narrow rampant fiscal deficits and still-resilient drilling in the United States are adding to the global oil glut.

PMI drops to near-four year low

2016 has so far shown a loss of growth momentum in the non-oil private sector, with business conditions improving at the weakest rate since March 2012. Underpinning the slowdown was a relatively subdued rise in new work, which was linked in turn to a near-stagnation in new export business. Growth rates for output and employment also eased, though stocks of pre-production items increased more quickly. On the price front, tariffs dropped again, with firms able to offer discounts amid muted cost inflation. Falling from 53.3 in December to 52.7 in January 2016, the headline Emirates NBD UAE Purchasing Managers’ Index (PMI)—a composite indicator designed to give an accurate overview of operating conditions in the non-oil private sector economy— was at its lowest level in 46 months during January. The latest slowdown continued the recent trend seen across the sector as a whole—Q4 2015 was the weakest on average in over three years (53.9).

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THE MARKETS

Banking on wealth Renoy Kundukulam, Head of Priority Banking, Noor Bank, looks at why banks should examine offerings for Islamic wealth management solutions and gives an overview of the global markets

Renoy Kundukulam

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here are nearly 500,000 high net worth individuals (HNWIs) in the GCC alone; these clients hold roughly $1.7 trillion of assets. A large majority of them are Muslims. If you look at the larger banks, be it in Switzerland, or in other established jurisdictions, it is mainly in the conventional banking space that wealth management solutions are offered to clients. But, by the very nature of the community, there is an intrinsic need to provide Islamic wealth management solutions. It is a clear gap that many of the banks today do not fill, which is why we see a faster growth in Islamic banking versus conventional banks. The low oil prices have had an impact on liquidity and the cost of funds. As the demand for Islamic wealth management solutions is primarily from the GCC region and the sentiments in the region are weak due to the low oil prices, investors could take the wait and watch approach.

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As the demand for Islamic wealth management solutions is primarily from the GCC region and the sentiments in the region are weak due to the low oil prices, investors could take the wait and watch approach.

$1.7 trillion

the amount of wealth that HNWIs in the GCC hold

Over the last two to three years, there is a small difference we have seen when we look at the global client base versus that in this part of the world. Here, in the UAE, HNWIs are more focused on growth of wealth, not just preservation. They look at investment solutions that can give them a strong yield. Globally, clients are happier to preserve wealth with small growth at best, aiming to beat inflation. Here, HNWIs are keenly looking at where they can invest their surpluses and make high returns. It becomes a responsibility on us to make sure that we not only manage their money right, but also provide tactical opportunities that can give impetus for growth to the client’s overall portfolio.

GLOBAL MARKETS

First came the Fed rate hike in December 2015 followed by a further steep fall in oil prices towards the end of the year. This year began with a blood-bath in equity markets. Within

three weeks of January 2016, all the gains made by most global equities in 2015 were reversed. In the debt category, post the Fed rate hike and subsequent hit on investor sentiments in early January, many debt instruments are under stress. In 2015 clients used to leverage to get high single digit returns on certain securities, whereas now, on a plain-vanilla investment (without leverage), clients can get double digit returns. With macro indicators tilting away from strong positivity, it is highly likely that the Fed will defer the second rate hike by another two quarters and the Bank of England is likely to follow suit. Other major regions such as Europe, Japan, and China are likely to continue with the monetary easing trend. Going by this, in the year ahead, we expect Europe and Japan to outperform other equity markets. The correction in equity markets paves the way for cheaper valuations. The global PE (Price to Earnings ratio),

which was on the expensive side, has again come back to long-term median levels (trailing PE of 17x). Soon, we should see quite a few valuations looking attractive from a technical perspective. However, further dollar strengthening could turn investors against emerging markets. For the Middle East’s energy-rich nations, the slump in oil prices is bringing an end to a long run of fiscal and current account surpluses that had seemed to make them immune from the financial challenges facing other developed and emerging markets. Needless to say, oil has continued to decline to levels that investors would have called ‘unthinkable’ a year ago. This has put unusually heavy pressure on countries’ balance sheets. All in all, 2016 will hold particular challenges for investors. In an environment of low interest rates, equities, a preferred asset class, could be hit with poor sentiments. While real estate may offer interesting investment opportunities in pockets, adequate bond yields will probably be difficult to achieve without additional risk. Commodities could return to the centre of investor focus over the course of the year, should the current excess supply diminish. It is, therefore all the more important to diversify portfolios broadly across asset classes, regions and sectors, to take hedging mechanisms into account and to think carefully. While you are at it, why not do it the Islamic banking way, where even fixed income securities (such as Sukuk) are a notch safer as they are asset-backed.

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THE MARKETS

OPEC and the oil price HE Dr. Emmanuel Kachikwu, Nigerian Minister of State for Petroleum Resources, and immediate past President of the OPEC Conference, anticipates an OPEC Meeting by March 2016

HE Dr. Emmanuel Kachikwu

uring an interview at The 7th Gulf Intelligence UAE Energy Forum in Abu Dhabi, UAE HE Kachikwu said an OPEC meeting is fairly possible as current prices are challenging.

What is your outlook for oil prices in 2016?

I certainly hope that it doesn’t go below $30 per barrel, for the sake of the survival of everybody on the board of investors and the countries who have heavily invested in this territory. At the time that we held the last OPEC meeting (December 4th) it was clear to all of us that we could not arrive at some structural way to intervene, for whatever reasons we did, prices are going to slide downwards. We did say that if oil prices then hit the $35 per barrel area, we’d look to see how we can bring the contending parties back to the table. At these prices, you begin to feel really challenged.

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I anticipate [an OPEC meeting] fairly quickly, possibly by the end of February or March.

Will that change OPEC’s strategy of rolling over its policy to maintain market share? OPEC’s production averaged 31.7 million barrels a day in December 2015, higher than the 30 million barrels per day earlier in 2015. That’s a big question. Up to 65 per cent of the oil producing market is outside the hands of OPEC. So unless you have all the producers coming back to the table, you really would not make a dramatic difference. My perception—and this is not an OPEC position—is that you will see the oil price get worse and then it’ll get better. I expect to see the oil price in the region of $40 per barrel—$50 per barrel by the end of the year. How do oil companies even survive

in terms of production? Everybody is pulling out investments in these areas. How do countries even adapt? You’re going to see a lot more strife. Oil has always been a catalyst for so many things.

OPEC’s strategy to retain market share is a policy led by Saudi Arabia, but OPEC is very divided. The big four Gulf states are on one side and members like Nigeria, Angola, Algeria, Venezuela and Ecuador are on the other. How did you as President bridge that gap between OPEC members at the December meeting?

I had to move from emotion to logic. My duty as OPEC President was to make sure everybody left the room united rather than box each other out, which we succeeded in doing. Now, we have a two to three month window before we go back.

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The prices unfortunately are moving lower faster than the barrels are going off the market. And to make everything worse, the US shale producers are going to be there no matter what we do. They may disappear momentarily when the prices are too low for them to survive. But sometime down the road, the US shale producers will be back—they have become a constant equation in the dynamics of the global oil industry. Hopefully, producers are taking time during this period to look at costs. All of us got spoiled when high oil prices meant there was big money and all kinds of mega-projects just didn’t make sense. In Nigeria, for example, one of the things that we’re doing is looking at our projects and saying: do these projects make sense? A lot of projects today don’t make sense [with current oil prices].

I expect to see the oil price in the region of $40 per barrel – $50 per barrel by the end of the year. How do oil companies even survive in terms of production? Everybody is pulling out investments in these areas. How do countries even adapt? You’re going to see a lot more strife. Oil has always been a catalyst for so many things. - HE Dr. Emmanuel Kachikwu

the country still plans to add over one million barrels per day in 2016. Plus, Iraq wants to go from 4.3 million barrels per day to six million barrels per day by the end of the decade. This sort of mentality doesn’t help solve the equation?

And this is what you’re suggesting is going to balance the market and reduce the oversupply that is pushing oil prices down?

No, it doesn’t. But, if you pack all those barrels into the room and the prices continue to slump, it does not make fiscal sense for anybody to keep presenting their natural resource. In Nigeria, diversification is key, because the current oil numbers don’t make any sense for us.

You think that a lack of investment on higher cost projects will bring stability back to the oil market and enable prices to climb to $50 per barrel – $60 per barrel by the end of 2016?

Russia is producing at an incredible number, reaching a record high of 10.8 million barrels per day in December. What has happened to this concept of Moscow showing up to the OPEC meetings and having backdoor meetings?

Yes, absolutely.

I would not say $60 per barrel but I think I would comfortably say the price will get closer to $50 per barrel, as almost 50 per cent of investments are being pulled out of the market right now. Ultimately, that will impact volume.

Saudi Arabia has added about 1.5 million barrels per day in the last couple of years to the market and Iran’s Minister of Petroleum Bijan Zangeneh said

Well, that hasn’t taken barrels off the field.

No, nobody has. So there’s no spirit of OPEC and non-OPEC cooperation in 2016?

I don’t see it. I think you’re going to have informal factors bring parties together. It’s not going to be formal meetings where parties are agreeing to take barrels off the field. And those informal factors are going to be led by the investors.

It won’t be a case of politics bringing producers together?

I don’t see that happening. That’s my perception today.

Are you suggesting that there is still no will to give up market share? I would say that, yes.

Gulf Intelligence: Gulf Intelligence facilitates knowledge exchange between stakeholders. The strategic communications and public affairs consultancy produces boutique industry forums and roundtable discussion series globally with an architecture that ensures all participants engage in a dynamic and competitive exchange of knowledge towards a shared goal. The Dubai-based firm assists Middle East companies and government entities to tap dormant intelligence and create knowledge reservoirs that can be utilised to bolster their profiles, to communicate with stakeholders and to overwhelm competitors.

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THE MARKETS

W HE Suhail Al Mazrouei

OPEC outlook 2016: energy exporters perspective HE Suhail Al Mazrouei, Minister of Energy UAE, discussed the oil market at the 7th Gulf Intelligence UAE Energy Forum

hat is your outlook for volatility in the oil market in 2016?

We need to look at the symptoms of what is happening. Last year, I said that we have an oversupply problem that was not created by OPEC, but OPEC was the one asked to solve it. Everyone said it was not their problem, but it’s everybody’s problem. The falling oil prices have incentivised everybody to react. The world is going towards an equilibrium—the market is going to take a bigger share in putting the price in an envelope that is comfortable for all. I don’t think any of the international oil companies (IOCs) will tell you that they are comfortable producing in the current price environment. We have seen a significant drop on the level of investment. But we need to look at the bright side as well, because it is working as producers are not growing their production—that’s going to eventually fix the glut.

How long do you think it will take to weed out the marginal production? Many thought that oil prices would be around $55 per barrel—$60 per barrels by the end of 2015, yet prices fell towards a 12-year low in January.

Last year, I thought that it would take one to two years, depending on the level of cooperation [between oil cont. on page 14

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THE MARKETS

cont. from page 12

producers]. There is still hope that during 2016 we will see a correction. It will not be in the first quarter, or the second quarter—the first six months of 2016 are going to be tough. But we will get out of this mess gradually. Once you have a problem of this magnitude, it is not fair to ask OPEC to come and withdraw 2.7 million barrels per day from the market just keep the prices where they were. OPEC’s strategy is working in that we have seen a major reduction in the yearly gradual increase in production from the non-OPEC producers. Let people compete and let the price be the judge. Oil producers will not produce if they are losing money. But if you’ve already invested in the market, then you are not going to close the wells. The industry will survive this low.

How long do you think it will be before we break out of this $30 per barrel—$40 per barrel range?

At the beginning of 2015, we were assuming OPEC’s production would be 30 million barrels per day, but we ended up producing 31.5 million barrels per day. When we said [30 million barrels per day], we were assuming that there will be some level of cooperation from the others. OPEC tried to hold meetings, but everyone said it wasn’t their problem and that it was someone else’s problem, that left the supply-demand balance to the market, which was a wise thing to do. If people artificially do something to the market, it’s not going to last. And then the market will expect them to come again if something happens and do it again.

Do you think there is a good reason for OPEC to call an emergency meeting to discuss its strategy to maintain market share, which was decided in November 2014?

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There is still hope that during 2016 we will see a correction. It will not be in the first quarter, or the second quarter—the first six months of 2016 are going to be tough.

- HE Suhail Al Mazrouei, Minister of Energy UAE

I’m not convinced that OPEC alone can make the change and I’m talking here as Suhail Mazrouei, a representative of the UAE. I am convinced that we are going to see a correction before the end of 2016. The increase in demand in 2015 was higher than we expected. We said 1 million barrels per day—1.25 million barrels per day and we ended up with 1.5 million barrels per day.

How much of non-OPEC production outside the United States do you see as part of a price correction? The problem with current oil prices goes beyond the US’ shale oil market. If you are a producer in the North Sea and you pay all of your taxes, is it economical to produce at $35 per barrel? Go and ask anyone. Everyone is shying away from investments because they are prioritising their budgets. I’m not saying they’re not investing, but are they investing with the same courage that they used to? I don’t know if they are.

How does OPEC accommodate for Iran’s return to the market? They have aspirations to bring at least another one million barrels per day to the market in 2016.

All OPEC members, including Iran, have a right to increase their production. We are not going to restrict anyone. Global demand is increasing, so someone needs to take part of that market share. The UAE decided in 1999 to increase capacity from 2.8 million barrels per day to 3.5 million barrels per day,

which is less than a one million barrels per day increase. It cost $75 billion and took us almost eight years to date and we are still not finished. It takes a lot of time to complete projects and come up with a mechanism. Maybe others have a quicker way, but that was our experience. Good luck to anyone who can do it in six, or three months. If you ask any IOC regarding the level of investors’ appetite today in the current market, I think they are more focused on developing what they have rather than taking on something new.

Saudi Aramco is contemplating issuing an initial public offering (IPO) of at least some of the assets. Is this going to be contagious?

You’re asking the wrong person here. I’m not the spokesman of ADNOC, or the government of Abu Dhabi. I think it’s fair to assume that every government has the right to manage their assets and manage their business. I’m sure no one is going to do something like this (IPO) just like that. It’s got to be studied and decided if it’s going to positively affect the economy. Let’s take Statoil, which used to be stateowned. Then Norway started to make it a company that is partially state and partially public—that model has been proven to work. So, it’s not something that has never happened before and international oil companies need to be able to evolve to help their economy. We haven’t evaluated it as a model for Abu Dhabi. But I’m not the right person to answer that question.

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21/02/2016 11:07

LR5724-CBD-7-in-One.pdf

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26/01/2016 13:18

LEGAL FOCUS

Egypt introduces a Secured Transactions Law for the first time Bassam Moussa, Head of Banking & Finance Egypt, Khodeir & Nour in association with Al Tamimi & Company discusses what the new law means for banks and business

Bassam Moussa says that the availability of collateral is a strain on financing.

n 1971, three teachers who had pooled $1,350 to start a coffee store in Seattle needed additional capital to keep their business running. They decided to borrow $5,000 from a bank. The start-up that they originally named Starbucks Coffee, Tea, and Spice (now Starbucks) was able to get the financing it needed to grow and expand; eventually becoming the Fortune 500 company it is today. Credit is the lifeblood of business. All firms, large and small, need it to grow and thrive. However, access to credit can be constrained, especially in developing countries. According to the World Bank, more than half of private firms in emerging markets have no access to credit. That figure reaches 80 per cent in the Middle East and Sub Saharan Africa. Banks in developing countries are usually reluctant to accept movable assets as collateral due to the inadequate legal and regulatory environment in which banks and firms co-exist. In this context, movable assets become ‘dead capital’. Movable assets, as opposed to fixed assets such as land or buildings, often account for most of the capital stock of private firms and comprise an especially large share for micro, small and medium-size enterprises (SMEs). For example, in the developing world, up to 80 per cent of the capital stock of businesses is typically in movable assets such as machinery, equipment or receivables, and only 20 per cent is in immovable property. The availability of collateral is a constraint on financing, and in underdeveloped financial markets insufficient collateral is one of the main reasons firms are rejected when they apply for bank credit. The above applies to Egypt to a great extent. Adding to that, banks in Egypt have excesses of unutilised

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liquidity and despite many initiatives to encourage SME lending and microfinance such initiatives have yielded very limited return on the lending rate. One of the main reasons for this is the lack of sufficient collateral. On November 15, 2015, Egypt passed law no.115/2015 regulating the taking of security over movable assets (the ‘Movables Security Law’). The Movables Security Law is considered a major reform in the area of secured transactions in Egypt. The Movables Security Law allowed for the first time non-possessory charges over movable property to exist and introduced collateral registries for movable assets as well as special enforcement of securities. Over the next couple paragraphs we shed light on the main features of the law.

SCOPE OF THE LAW

The Movables Security Law is primarily concerned with non-possessory pledge/charge over movable property. Under the Movables Security Law a variety of movables, whether existing or future physical assets or moral rights, can be used as collateral. This includes: receivables and credit notes, bank deposits or accounts, equipment, tools, stock, trees, agriculture produce, farm animals, birds, and metals, as well as intellectual property rights. Who can benefit? The Movables Security Law is limited to banks and other financing institutions/corporations.

THE REGISTRY

The Egyptian Financial Supervisory Authority (EFSA) will establish an electronic registry for collaterals made pursuant to the Movables Security Law and any amendments or cancelations thereof. The registry will fulfil two key functions: to notify parties about the existence of an existing security

Under the Movables Security Law a variety of movables, whether existing or future physical assets or moral rights, can be used as collateral. - Bassam Moussa Head of Banking & Finance Egypt, Khodeir & Nour in association with Al Tamimi & Company interest in movable property and to establish the priority of creditors with regard to third parties.

EFFECTS OF REGISTRATION

Upon registration, collaterals become effective with regard to third parties on the date and time of registration. Any party, who has a legitimate interest on the movable property may object to the registration before summary courts. Further, in an insolvency event, movables subject to a registered collateral will not form part of debtor’s assets, provided registration occurred prior to commencement of the insolvency procedures. Finally, registering collateral grants the secured creditor first rank security over the asset, which ranks higher than all other forms of security or pledges provided by any other law with the exception of judicial expenses and enforcement expenses of the security itself and without prejudice to the rights of possessory creditors under the Civil Code.

ENFORCEMENT

The enforcement regime introduced by the Movables Security Law represents a breakaway from the standard Civil Law system of enforcement. The Movables Security Law allows creditors to directly recover their debt from third party debtors of the borrower or directly sell

the pledged movables without court order as well as direct set-off in the case of bank accounts. In the absence of contractual authorisation for the aforementioned actions, the creditor can always obtain a court order in a process which is simplified compared to the normal enforcement of debt or securities created under other laws.

CREDITOR’S LIABILITY

It is noteworthy that, as the Movables Security Law provides banks with flexibility and discretion when it comes to enforcement, the law also requires banks to indemnify the debtor/guarantor and other rights holders against any damage caused by breach of the enforcement procedures. The executive regulation is expected to be issued by February 2016 following which there will be a substantive amount of work to be done to implement the law and establish the registry. We are hopeful that the implementation will be at the same level of innovation as the law itself as great laws may become ineffective or useless if not properly implemented. Overall, studies have shown that introducing collateral registries for movable assets increases firms’ access to banking finance. There is also evidence that this effect is larger among smaller and younger firms.

Source: This article first appeared in Al Tamimi & Company’s Law Update publication Dec/Jan 2016 edition. Bassam Moussa, Head of Banking & Finance Egypt, Khodeir & Nour in association with Al Tamimi & Company - b.moussa@tamimi.com

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COUNTRY FOCUS Saudi Arabia

As this issue of the magazine headed to press, news broke that Saudi Arabia and Russia have agreed to freeze oil production. "Freezing now at the January level is adequate for the market," Saudi Arabian Oil Minister Ali al-Naimi told the 6th Ministerial Conference of the Carbon Sequestration Leadership Forum in Qatar in mid-February. This story is still developing.

Saudi Arabia: life after oil In October, the IMF’s gloomy prediction that Saudi Arabia could be bankrupt by 2020 made headlines around the world—but with tiny Government debt and massive fiscal reserves, surely things can’t be that bad?

(Credit: Fedor Selivanov/Shutterstock.com)

he future of Saudi Arabia is certainly splitting opinions. While Standard & Poor’s has slashed its debt rating and Fitch Ratings has revised its outlook to negative, Moody’s has affirmed its ratings and maintained its stable outlook. While some economists point to diminishing reserves and a young population that needs investment, others point to promising new measures outlined in its 2016 budget, aimed at reigning in spending and diversifying the economy. The one thing that everyone can agree on is that Saudi Arabia is heavily dependent on the price of oil, which has taken a 75 per cent tumble since June 2014. Saudi Arabia derives about 40 per cent of its GDP, 90 per cent of Government revenues, and 85 per cent of exports from the hydrocarbons sector. Although there has been a push to encourage private sector growth, this is largely dependent on funding from the public sector, which brings us back to a dependency on hydrocarbon revenues.

BLACK GOLD

Saudi Arabia’s mighty fiscal reserves have already been injured by the fall in oil prices. The country’s reserves shrank to 74.2 per cent of GDP at the end of 2015 from 87.2 per cent at the end of 2014, according to data from RAM Ratings. Central Government deficit widened to 15 per cent of GDP in 2015,

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when it stood at only 2.3 per cent at the end of 2014. Overall, the oil price slump brought the year’s fiscal revenue down by a painful 41.8 per cent. Saudi Arabia’s fiscal power may be waning but, thanks to years of high oil prices, it still has solid financial buffers. Standard & Poor’s estimates Government liquid assets at about 111 per cent of GDP for 2015-2018. “In our view, this level of assets significantly offsets the concentration risk related to the economy’s hydrocarbon dependency,” the ratings agency said. “However, we could reassess our view that the Government has an exceptional buffer to offset most economic or financial shocks should liquid assets fall below 100 per cent of GDP.” The worry is that reserves could diminish quickly if oil prices remain low. In its 2016 budget, Saudi Arabia slashed its forecast for Government revenue by 28.1 per cent; this assumes, somewhat optimistically, an

Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)

oil price of around $40.6 a barrel— higher than the current price level. According to RAM Ratings, if the price of oil per barrel falls lower than the Government’s assumption by just $1, budgeted revenue would nosedive by about SAR 9 billion. The corrosive effect of lower oil prices can already be seen on Saudi

 If the price of oil per barrel falls lower than the Government’s assumption by just $1, budgeted revenue would nosedive by about SAR 9 billion. - RAM Ratings

Key highlights from Saudi Arabia’s 2016 budget  Price hikes in petrol and utilities and a reform of generous subsidies are to be implemented over the next five years.  A hike in petrol prices of 66 per cent (91 octane) and 50 per cent (95 octane) was announced in December.  The growth of public sector salaries, allowances and bonuses are to be slowed.  Privatisations of Government-owned companies, including oil giants, are planned.  A medium-term expenditure framework with a budget ceiling and a debt management office is in the works to improve management of public finances.  Water prices for industrial, Government and large corporate users more than doubled and electricity, and gas and diesel prices were raised.  Taxes on tobacco and soft drinks are to be raised.  Plans for a GCC-wide value-added tax are in the works, although unlikely to be implemented before 2018.

Arabia’s banking sector, which has always been considered solid thanks to ample liquidity. Saudi banks’ annual reports for 2015 make worrying reading, with a dramatic slowdown in deposit growth. According to Moody’s Investor Services, Saudi banks’ highlevel annual results for 2015 show deposit growth slowing to just one per cent in 2015 from 12 per cent in 2014. “In the context of oil prices that have declined by more than 75 per cent since June 2014 and a 14 per cent reduction in the 2016 Saudi Government budget, this lower deposit growth is credit negative for Saudi banks,” the rating agency said. “Lower deposit growth will limit banks’ capacity to lend and refinance existing borrowers and increase borrowing costs, which will reduce asset quality and drive increased provisioning costs for banks.” Saudi banks mainly depend on domestic deposits, with the role of market funding being limited by a strict loan-to-deposit ratio of 85 per cent. The International Monetary Fund (IMF) warned that reduced oil inflows and slower Government spending growth will continue to slow deposit growth, which in turn will weaken credit supply. “As corporate profits are affected, NPLs will likely rise, although the more subdued nature of this credit cycle compared to past cycles—owing to SAMA’s [Saudi Arabian Monetary Agency] stepped-up regulation and supervision of banks—should mean the impact on asset quality is limited,” said the IMF in a recent report. “The reduced supply of credit and weaker bank and corporate balance sheets will have feedback effects on growth.” As a knock-on effect, bank loans will be harder to obtain and more expensive. The sector which will be most hurt by this are SMEs, which contribute around 33 per cent to Saudi Arabia’s GDP. cont. overleaf

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COUNTRY FOCUS Saudi Arabia

cont. from page 19

Saudi Arabia’s subsidy cuts include a

50%

increase in 95 octane petrol prices

“Saudi banks are making it difficult for start-ups to get off the ground by decreasing loans to new entrepreneurs, despite the fact that these loans are backed by a Government SME Loan Guarantee Programme,” said Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA).

NEW DIRECTION

It seems Saudi Arabia’s only option is to look beyond oil and tighten its belt until non-oil revenues pick up. Its 2016 budget unveiled new measures to rationalise expenditure, increase non-oil revenues, and improve the fiscal policy framework. “The new 2016 budget for Saudi Arabia, announced at the end of December last year, aims to reduce the current deficit to SAR 326 billion, down from SAR 367 billion for 2015,” explained Armstrong. “One of the measures is to cut projects spending to SAR 840 billion (down from SAR 975 billion) and improve their efficiency to counterbalance the negative effects of falling oil prices. However, the cuts to public expenditure will exert a powerful drag on GDP growth. We expect nonoil GDP growth of just 1.5 per cent in 2016, the weakest since 1994, followed by a gradual recovery to three per cent in 2017.” The conundrum Saudi Arabia faces is that to increase non-oil revenue, it must continue to invest in the

60% 74% increase in 91 grade petrol prices

increase in diesel prices

These measures will most likely meet with a backlash from a society that is used to cheap energy prices.

- Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA)

private sector and infrastructure; however, lower oil prices has put the Government under pressure to cut spending. The country’s large reserves are the main factor protecting its credit rating, and it can’t risk frittering away too much of its capital. “Although the Government has begun to cut back on expenditures, further cuts are likely to reduce the fiscal deficits,” said Moody’s. “Without such cuts and/or non-oil revenue increases, the Kingdom’s creditworthiness will be affected.” Although the 2016 budget included steps to rationalise spending and boost the non-oil sector, the effect this will have is negligible when faced with the lowest oil prices for 11 years. “Whilst the Government is taking the initiative to address the problem of falling oil prices, the announced measures will have a modest effect—our forecast is for a deficit of 14 per cent in 2016, only 1.5pp narrower than last year,” said Armstrong. “Measures to cut expenditure are countered by the 11 per cent fall in overall revenues that are expected as a result of weaker

oil prices. However, taking those steps was certainly needed to avoid the deficit’s growth getting out of control.”

POSITIVE CHANGE

Even though the new measures will do little to stem the effect of falling oil prices, they are considered positive for the future of Saudi Arabia. The IMF noted that SAMA’s regulation and supervision is being strengthened by the reforms. “Formalising the macroprudential framework to clearly establish responsibilities and the way countercyclical policy tools will be used would further enhance policy implementation,” it said in a statement. The fuel subsidy reforms are also considered a positive step. These include a 50 per cent increase in higher quality 95-octane petrol prices, a 66 per cent increase in lower quality 91-grade petrol prices, and a 74 per cent increase in diesel fuel prices. “These fuel-price reforms are credit positive for the sovereign because they will lower current expenditures and bolster Government finances dented by cont. on page 22

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Saudi Aramco to list? for reforms, including privatisation in various sectors of the Saudi economy and deregulation of markets, which the company strongly supports.” If the listing goes ahead, Saudi Aramco, thought to have 10 times the reserves of rival oil producer Exxon, would become the world’s most valuable quoted company. Apple, Google and Facebook would all be in its shadow. Estimates vary, but its value is being put upwards of $1 trillion. More significantly, however, the listing would herald a new age for Saudi Arabia, which has always protected its cheaply produced oil from outside involvement. With the transparency an IPO demands, any cries of corruption would be quashed. It signals a move towards modernisation and a progressive, international business environment.

Aramco’s famous exhibition centre in Dammam; if the listing goes ahead, Aramco’s closely guarded secrets will be made available to potential investors.

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(Credit: Gimas/Shutterstock.com)

Perhaps the most noteworthy reform is Saudi Arabia’s plan to float Government-owned companies. The news that energy giant Saudi Aramco, the country’s national oil company, is considering an IPO sent shockwaves throughout the financial world. Saudi Aramco is the world’s biggest energy firm, and likely one of the most valuable companies in existence. Saudi Aramco confirmed the news in a statement on its website. “Saudi Aramco confirms that it has been studying various options to allow broad public participation in its equity through the listing in the capital markets of an appropriate percentage of the company’s shares and/or the listing of a bundle of its downstream subsidiaries,” the statement said. “This proposal is consistent with the broad and progressive direction pursued by the Kingdom

21 18/02/2016 09:37

COUNTRY FOCUS Saudi Arabia

the downturn in global oil prices, while reducing macroeconomic distortions,” Moody’s said in a recent comment. “Although fiscal gains from subsidy reform are likely to be moderate this year, we expect gains to accelerate when oil prices increase. Total subsidies and transfers composed about 4.9 per cent of all consolidated expenditures in 2014, although this likely understates the costs of energy price distortions because the subsidies are implicit— prices are kept artificially low, but this does not have a direct cost on the Government’s balance sheet.” The IMF estimates that the opportunity cost from low energy prices in Saudi Arabia amounted to nearly 10 per cent of GDP in 2014. The price hikes will also lead to efficiency gains, reducing wasteful overconsumption driven by artificially low prices. According to the IMF, closing the price gap between Saudi Arabia’s domestic fuel prices and international prices would lead to efficiency gains of 1.5 per cent-2.1 per cent of GDP.

THE DOWNSIDE

Of course, the shakeup was bound to have some negative impacts on a population unaccustomed to change. The hike in energy prices, for example, was bound to prove unpopular. “Saudi Arabia is planning to cut planned spending by 14 per cent in 2016, raising the prices of gas, diesel, water and electricity,” said Armstrong. “These measures will most likely meet with a backlash from a society that is used to cheap energy prices. Businesses will have to face higher energy bills which might have an impact on their operations and create obstacles to future investments. Salaries may well experience downward pressure as businesses seek to reduce costs. Furthermore, the price of goods and services are likely to increase as businesses shift some of the burden to consumers.”

The magnitude of the oil price decline means that the 2016 budget forecasts total revenues of SAR 513.8 billion, down from an estimated SAR 608 billion last year. According to Moody’s, the price hikes are just the beginning, and energy will have to become even more expensive to help the Government reduce its deficit. “Although these unprecedented price hikes are credit positive, Saudi Arabia still has some way to go to fully close that gap. Indeed, even with these reforms, Saudi Arabia’s diesel prices remain much lower than those of regional neighbours,” Moody’s said. Many economists seem to think that although the new measures are promising, they are simply too little, too late. “The magnitude of the oil price decline means that the 2016 budget forecasts total revenues of SAR 513.8 billion, down from an estimated SAR 608 billion last year,” said Fitch Ratings. “Budgeted spending at SAR 840 billion is below estimated actual spending for 2015 (SAR 975 billion), but this leaves a projected deficit of SAR 326.2 billion ($86.9 billion), around 13.5 per cent of GDP. This is by far the largest fiscal deficit that the Saudi authorities have budgeted for.” Another criticism is that many of the new measures are somewhat vague, with objectives stated without a method or timeline. “The measures include various cuts to subsidies…‘Saudisation’ of the workforce, and privatisation of some state owned enterprises; but in many of these areas details remain far from clear,” said Armstrong. “Measures to boost the non-oil sector take time to have an impact on business confidence—growth in the

non-oil sector has been slowing since 2013 and financial indicators suggest lending to the sector is also slowing.” Although some steps, such as VAT and corporate tax are considered a good move, the implementation will be too slow to have any impact in the immediate future. “A value-added tax approved by the Gulf Cooperative Council is unlikely to be implemented in Saudi Arabia before 2018, according to Government communications,” Standard & Poor’s pointed out. “As such, fiscal revenue will continue to be pressured by low oil prices, with very limited room for revenue diversification in the near term.” Low oil prices are conclusively the biggest threat to Saudi Arabia’s economy, however other problems are lurking in the background. The Saudi riyal continues to be pegged to the US dollar, which provides stability but chains the country’s monetary policy to that of the US Federal Reserve, leaving little flexibility to use monetary policy. Tensions are also heightening with Iran, which is threatening to exasperate an oversupply of oil as sanctions are eased. Potential security risks undermine confidence and foreign investment, and drive up security costs. Its Government is also at a nascent stage, and decision-making is highly centralised. However, the new measures show that Saudi Arabia is committed to modernisation. The old adage goes that it is never too late to change; only time will tell if this will hold true for Saudi Arabia.

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21/02/2016 11:22

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21/02/2016 16:26

PRIVATE BANKING

‘You had me at Abu Dhabi’ Mark Peters, Head, Private Clients and Wealth Management, ADCB, explains why it is so important to have a local private bank that knows its clients business from A to Z

DCB launched its private banking proposition in January 2016 here in the UAE with two private banking teams, one in Abu Dhabi and one in Dubai. The bank believes that by offering a local alternative to private banking that can not only provide clients with wealth management solutions, but will also know the family’s business inside out, ADCB has a distinct advantage over private banks that are based in London, or Geneva for example. ADCB is a local bank that has a strong history of serving the local community, particularly with the wealth-creating family businesses and families in the UAE. Historically the local banks have not really catered to the wealth management sector, because, according to Mark Peters, Head, Private Clients and Wealth Management, ADCB, the local banks had enormous advantages in the onshore activities of these family enterprises. The wealth management segment typically had been served by people flying in from private banks based in places such as London and Geneva and ADCB recognised that developing a private bank was a huge opportunity. “A local bank like ADCB has deep roots with the families that have created the wealth and it has served them well in the 75 to 80 per cent of the needs that they have. We know the clients better. So, we wouldn’t suggest

Mark Peters

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ADCB is the local solution for private banking, says Mark Peters.

an investment that is inappropriate because we have knowledge about the families and all of their activities. The mandate then was to go and build a team of people that have pedigree degrees from world class international financial institutions, have many years of experience in doing this, bring them in, put them on the ground and make their capabilities available to local families. This is the kind of expertise that was only available previously from private bankers that were flying into the UAE, for example,” said Peters.

ADCB believes that there is an enormous amount of synergy within the bank, allowing it to be able to bring relationship managers, along with employees in the other divisions in the bank, whether it is the commercial banking people, treasury, the consumer banking people, and have them all sit round a table and be able to define exactly what opportunities are best for a family’s investments and give them personalised, bespoke investment and wealth management opportunities.

“In sitting down and talking to HNW families about the wealth management proposition ADCB is now offering, the goodwill of the ADCB brand name and franchise and history, the trust that has been built up–because we have been their partners over decades–has translated into immediate acceptance and adoption of this notion. This has been very well-socialised and very well accepted and although things are early in the game, it is going well,” said Peters. cont. overleaf

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PRIVATE BANKING

cont. from page 25

To quantify that, Peters said that since the inception of the private banking offering, the bank has seen several families and their businesses extend their commitment to the bank. While it is easy to talk to potential clients and get a verbal affirmation that they would be interested in a private bank offering from ADCB, the proof that it is a needed proposition is in the clients signing up, and that has been happening, according to the bank. “We have been very gratified to see people increase the size of their relationship with us and trust us. We have also had them engage us in a dialogue and say they want us to come to see them and bring in our financial experts to discuss not only investing, but also, the client base that we are calling on has needs in the lending space that are more tailored and less productised. That has been immensely successful so far,” said Peters. Another area that ADCB is focusing on with its private bank offering is succession planning, an area of great concern to many business-minded families. “Early on we identified generational planning as being the key conversation that was going to be held here in the GCC, because there are lots of businesses that are transitioning from first generation to second generation. This week we had ten meetings to talk with people about issues specific to them, it could be everything from the second generation looking at the patriarchy and saying ‘we need to get succession planning completed’, to specific tax issues that they might have around an asset that is not held here in the UAE. An SPV

The elite private banking card is just one of many benefits in ADCB private banking.

[special purpose vehicle] for a second home for example, or just rational planning for various business structures,” said Peters.

KEEPING IT LOCAL

First and foremost, what ADCB can bring to the table that foreign-based private banks cannot is the fact that it has far more skin in the game being part of the community. ADCB has developed trust by the local population through its relationships with the clients, a trust that is perhaps not replicated by private banks that simply have a satellite office in the UAE. “We have been your bank doing other things for you for decades, you know us, and you know who to call. It is absolutely a trust thing,” said Peters. Another very important benefit to using ADCBs private banking option is that ADCB is less process-bound, much more convenient and easier to deal with than private banks from far away jurisdictions, where they have

A local bank like ADCB has deep roots with the families that have created the wealth and it has served them well in the 75 to 80 per cent of the needs that they have. We know the clients better. - Mark Peters, Head, Private Clients and Wealth Management, ADCB

much larger, more process-bound organisations, with more complex regulatory frameworks. “We are easier to do business with, we are a lot faster, and more responsive. I was in a meeting recently, there were three of my colleagues from different bank sections talking about a specific family situation. We can hold that meeting in a nanosecond. One person at the table could put forward an idea, another can respond and say why it would or would not work, and we know the families. When we combine our expertise within the bank, the family looks at us and says ‘you guys get me’. The other banks bring in an expert on one thing, but they don’t know what else the family is doing. They don’t know the families as well as we do,” said Peters.

BUILDING A BANK IN LEAN TIMES

“While we do not have a long legacy, we certainly do not have a bad legacy. I think people need more help in difficult times and this bank has always been a bank that has known to be there and have your back in tough times. For us, developing a private bank is an opportunity to exhibit that. I would also say selfishly that in good times it is probably harder to distinguish cont. on page 28

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PRIVATE BANKING

cont. from page 26

Financial highlights (31 December 2015) Return on average equity (%)

Return on average assets (%)

20.35

2.22

yourself. We are not retrenching, we are expanding and so, from a marketing standpoint that is a really good message, we are committed; we are not going anywhere,” said Peters. The private bank offering includes ADCB’s asset management and local brokerage business, and the bank has a deep expertise in the local markets, both the UAE and GCC. But it has now also leveraged off that and has the capability to offer access to the international markets, both on an execution basis as well as on a fullyfledged advisory basis. “I think the areas that are keenly interesting to our clients are areas of alternative investments, things that they would not see normally from local banks. That’s my background and the background of some of the people that we have hired. I think that is going to be very interesting to the families that we talk to,” said Peters.

WEALTH IN THE UAE

There is currently money flowing into the UAE because it is viewed as a safe place for investment for many people around the world. The UAE is looked at as an investment diversifier; if an investor has money in another developed part of the world. “The big private banks are very cumbersome and to get something done can take three or four months, because you have got large process

Basic earnings per share (AED)

0.93

bound institutions. Certainly I hope in my career we become as large as some of the traditional private banks in the region. The ability for us to make a decision for someone that we have known for decades, is a lot easier than it is for the foreign private banks. If we were to ship a file to Geneva, they would have to start from zero in terms of knowing the client. We know the client backwards and forwards in this building,” he said. ADCB has not formally put any number out there in terms of growth targets, but the management of the bank believes that this private bank can be a very meaningful effort. The bank currently has around 700,000 clients, and within that is a very large number of clients that should be served by the private banking segment. “The group of people that we are calling on are going to tend to need bespoke solutions and not productised solutions. We are going to take that even one level further and create far more customisation and a much more bespoke approach to private banking. It is the kind of thing that a large process-bound institution is going to find very difficult to do and because we have very quick conversations on the phone and our offices are in theirs, we can get it done far more efficiently and quickly,” said Peters. HNWIs tend to have three or four banking relationships and so ADCB

Capital adequacy ratio (%)

19.76

is in an excellent position to serve its customers well given that the bank is already dealing with up to 85 per cent of a family’s assets. “I would challenge the other private banks at the table and say ‘why do you belong here when we know these families so well’. I don’t think that we are going to have to compete with them; we are not asking for anything we don’t deserve, we will compete on our merits,” said Peters. “I asked one head of a family office here in Abu Dhabi about the opportunity to be part of our private banking solutions, he said ‘You had me at Abu Dhabi’. I think the local demand for us to fill is enormous and it is a huge opportunity. To leverage off the good will of this organisation is just not something that even the private banks out of London or Geneva have.”

Islamic investment In every opportunity that we run across, where we have the opportunity to provide the Islamic option, we are doing that and we are attempting to find new ways to do it where traditionally it has not been offered. Source: Mark Peters, Head, Private Clients and Wealth Management – ADCB

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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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ECONOMIC OUTLOOK

GCC economies cloudy In the face of much lowered oil prices the economic environment in the GCC has become somewhat more challenging

30 page 30-32 Oman.indd 30

ollowing the drastic drop in oil prices in 2015, the macro economic environment has changed dramatically. This has had wide-ranging consequences across the GCC region and has radically altered the financial landscape. Carla Slim, Economist Middle East North Africa, Standard Chartered Bank, addressed this during a recent speech at the Gulf Bond and Sukuk Associationâ&#x20AC;&#x2122;s Debt Capital Market conference held in Oman. â&#x20AC;&#x153;The first direct impact of lower oil prices we have seen for 2016 has been on the oil revenue front. Government revenue has taken a hit, and this led to large fiscal deficits in the region for 2015 and also large fiscal deficits in 2016 as we move forward. The deficits have come in different structured shapes and different sizes as well.

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The reality is that the decade of high oil prices is behind us and we need to adjust to the new reality of lower oil prices. Large fiscal surpluses, large current account surpluses and a very rapid accumulation of savings are a thing of the past,” she said. In order to finance these large deficits accumulated in 2015, governments across the region took a diversified approach through tapping some of their savings and issuing debt. Tapping savings was an immediate solution to the problem of financial deficits but, going forward, governments are likely to rely more heavily on issuing more debt, lowering spending and attempting to increase income. There will be further project delays and increasing project prioritisation as the liquidity environment tightens and governments look to decrease expenses.

“What have we seen as responses to lower oil prices is subsidy reforms in terms of fuel, in terms of utilities, water and electricity, and in some countries like Bahrain, even food. More project delays, more project reassessments, and more project prioritisation can be expected... Also in the medium term we are expecting the introduction of VAT [value added tax], and maybe in the medium to long term we can expect the introduction of income tax. But even in the short term we are even seeing indirect taxes increasing—all of these responses will boost revenues and increase government revenue. Government spending can be contained immediately but boosting income will take longer,” Slim said. Slim also talked about the impact that lower oil prices have had on the GCC’s pegged currencies.

“Now the spotlight in financial markets is focusing on the currency forwards markets. Financial markets feel that weaknesses and relative vulnerabilities of GCC economies today need to be reflected in price performance, and since the market cannot express this weakness in the spot market, it has taken it to the currency forward market to try to express these vulnerabilities. The forwards market is pricing in a devaluation, it is pricing in a move away from fixed currency exchange rates. Our view from our banks perspective, however, has been and still is that the central banks of the region are committed to their fixed exchange currency regimes at the current rate,” she said. “Our own view is that central banks still have adequate foreign currency reserves to be able to maintain their cont. overleaf

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(Credit: AndreyUG/Shutterstock.com)

The GCC economic outlook is currently somewhat overcast, however there are opportunities on the horizon.

31 16/02/2016 12:42

ECONOMIC OUTLOOK

cont. from page 31

peg. Yes we’ve seen Saudi Arabia has lost more than $100 billion in foreign currency reserves year-to-date since beginning of lower oil prices, but for other countries, such as Oman for example, this argument does not hold because Oman’s foreign currency reserves have remained broadly stable and if anything in 2015 have increased slightly. As of January, our GCC-wide view is that the region has more than $2.5 trillion in savings, whether counting central banks foreign currency reserves or sovereign wealth funds savings. So we think they are more than able to maintain their currency fixed to the dollar at the current rate, as long as they deem it appropriate for their own economies.” A devaluation of local currencies will not necessarily help improve the export prospective for regional economies either. Standard Chartered believes oil, the GCC’s largest export by far, will not be significantly more attractive to buyers should local currencies become devalued. In addition, a devalued currency will increase the cost of the goods and services which the region imports, which may result in a net cost for the economy in question. “We try not to spend too much time contemplating [the central bank’s] commitment [to their dollar peg] because the day the central bank changes their policy there will be no forward guidance; the central banks can remain openly committed to their currency regimes and then change their minds without giving a heads-up to the markets,” Slim said. “The implications this year of the challenges combined with responses is that fiscal deficits will remain large and they will remain wide, liquidity will be tight and growth will slow. Together this is a slightly more difficult combination in 2016 than what we have seen in 2015, times are tougher but opportunities have

32 page 30-32 Oman.indd 32

Large fiscal surpluses, large current account surpluses and a very rapid accumulation of savings are a thing of the past.

- Carla Slim, Economist Middle East North Africa, Standard Chartered Bank

definitely not dried up, if anything they have become more rewarding. To end this on a positive, I would like to flag a view we have for this year: we think financing of the fiscal deficits will probably rely more on debt than it did in 2015 because debt came slightly later during the year in 2015 for most GCC economies. We think that in 2016 everyone now is prepared for lower for longer oil prices and the share of financing for fiscal deficits will rely more on debt than on savings or foreign currency reserves than in 2015.” Michael Grifferty, President, The Gulf Bond and Sukuk Association, believes that the regulatory environment for bond and Sukuk issuance is reaching a state of maturity.

“I think policy makers understand the value and importance in developing the market and are taking a more and more strategic view rather than opportunistic, that’s still in progress but we see more emphasis on understanding the market. I think that the regulators have generally been supportive in a de facto way trying to support issuers who are trying to apply by providing more clarity on the frameworks so that issuers, and those advising them, will rely less on the goodwill and understanding of regulators to be supportive. This will also take some the onus off the regulators if there is more clarity in the regulatory framework then there will be less for regulators to talk about,” he said.

Focus on Oman The Gulf Bond and Sukuk Association (GBSA) in partnership with Dentons and Standard Chartered Bank held its inaugural debt capital market conference in Oman. The conference, which gathered senior government officials with over 100 leaders from the corporate, financial, legal and regulatory communities, coincided with an intensification of Sukuk and bond issuance activity in the Sultanate. HE Hamood Sangour Al-Zadjali, Executive President of Central Bank of Oman, delivered the opening keynote speech stating, “The Government raises debt for fiscal requirements and managing liquidity in financial markets. The pricing of these issuances also helps in developing a yield curve which could be a benchmark for other interest rates.” “Led by the Oman Government, more Oman-based companies have taken advantage of bond/Sukuk markets to extend their liability profiles and diversify their investor bases,” said Michael Grifferty, President of the Gulf Bond and Sukuk Association.

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FEATURE

GCC bankingâ&#x20AC;&#x201D; breaking away from oil Robert Abboud, MENA Financial Services Advisory Leader, EY, gives an overview of what the overall GCC banking sector will face going forward in the face of poor oil prices

Robert Abboud

he GCC banking sector is expected to face challenges in 2016 that could weigh on asset and deposit growth. The prolonged lower oil prices and the challenging regional geo-political environment is expected to lead to a drop in fiscal revenues for the GCC countries this year. As a result, GCC government spending is already witnessing cutbacks and rationalisation in non-essential sectors and capital programmes, whilst traditional subsidies such as energy are being curtailed. As such, asset and deposit growth in local banks will continue to be under pressure with impact from higher funding costs and consequently less profitability. Additionally, asset quality is expected to be under scrutiny, given the potential for an increase in non-performing loans if such less-than-favourable market conditions prevail. cont. on page 36

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21/02/2016 11:27

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FEATURE

cont. from page 34

BMI forecasts indicate that aggregate credit will still grow by around 6.8 per cent in 2016, which is an acceptable rate, but remains well below the annualised year-onyear growth of 11.4 per cent recorded between 2010 and 2014. Fitch Ratings support this challenging GCC view for 2016, wherein 70 per cent of the GCCâ&#x20AC;&#x2122;s GDP is driven, directly or indirectly, by the price of oil. While the banking sector is expected to face challenges this year, with every challenge lies an opportunity. Some of the relatively positive opportunities that the GCC banking sector can take advantage of include: potential sector entity consolidation across the region and within local GCC locations, a focus on sectors that provide more leverage to GCC governmentsâ&#x20AC;&#x2122; diversification and privatisation agendas, including activities and subsequent spending in healthcare, transportation and education sectors. They also include more business generated from infrastructure spend in Qatar and the UAE, further diversification into less serviced segments inluding SMEs, private banking and wealth management products, and increased spend on areas of innovation such as digital, with a view to increase customer satisfaction and efficiency while reducing costs. Publicly available information from rating agencies forecast slower economic growth for most GCC countries in 2016, with Kuwait as an exception wherein growth will be supported by strong public spending. The slowdown in growth across the GCC is primarily driven by the drop in oil price, however necessary spend on sectors that are supporting the social development and non-oil economic agenda of the GCC will continue. While GCC banks are largely driven by sovereign support and while there is a slowdown in growth, the GCC countries still have a strong ability and

Publicly available information from rating agencies forecast slower economic growth for most GCC countries in 2016, with Kuwait as an exception wherein growth will be supported by strong public spending. - Robert Abboud, MENA Financial Services Advisory Leader, EY

24% to 30%

The UAEâ&#x20AC;&#x2122;s share of the GCC wealth has increased from

propensity to support their banking systems. The introduction of more favourable interim regulations such as easing of sources and limits of capital, liquidity and balance sheet exposures, as well as the facilitation of foreign direct investments and public private partnership models, will alleviate some of the interim challenges. Furthermore, continued government spending that lends further support to the untapped sectors and customer segments will benefit the banking sector in providing for further asset growth. Government spending in the GCC, such as in Saudi Arabia and Oman, should be instrumental in developing a broad variety of sectors over and above what is considered as essential (i.e. healthcare, education and transportation). Such sectors that could support a stronger private sector play could include the likes of tourism, renewable energy, services, and manufacturing. Breaking dependence on oil revenue is crucial now and the shift to a selfsustaining private sector dynamic should be underway. Further revision of the tax regimes (including introduction of VAT) and government subsidy programmes should also take priority.

from 2009 to 2013.

The EY Growth Drivers 2.0 report identifies the sectors with the largest opportunity by asking three key questions: Which sectors have the most potential to stand on their own feet, without relying on government spending, subsidies and other support? Which sectors are likely to have the best linkages with the rest of the economy? Which sectors can create jobs that are substitutes for public sector employment for GCC nationals? In response to those critical questions, it is seen as an opportunity for banks to further diversify into financing and servicing nongovernment backed businesses. These sectors include healthcare, education, transportation, tourism, renewable energy, services, and manufacturing. Further to sector refocus, there is also a crucial need for banks to look into extending their services to new customer segments and needs. The bankable wallet needs to expand to keep up with the ever increasing sophistication and needs of customers. Such segments include SMEs, wealth and asset management, and mortgage finance. cont. on page 38

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14/02/2016 16:49

It’s time to execute your bank’s 2016 strategy. Do it measurably & rapidly. It’s a new year. Some of the opportunities & challenges could carry from 2015. The price of oil is one. Many could be new. Cost optimization, better risk management, aggressive liabilities build, new wealth management offerings…all great ideas. But its not about a rocket science strategy, its about the execution. Since 1999, Cedar has been helping leading banks in the Middle East successfully execute strategy and transform. From having lead the top 5 bank mergers to transformation across business, products, channels, credit, process, HR and technology - we have done it all. We are all about execution excellence.

Research

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FEATURE

cont. from page 36

SECTOR FOCUS

The most exciting trend for banks over the past ﬁve years has been the doubling of affluent wealth, a trend that shows no sign of faltering. Additionally, the increased sophistication of various niche segments within the high net worth group poses an intriguing opportunity for leading players globally and in the GCC. This niche customer segment is under-serviced by regional banks and asset managers, which provides the banking sector with a good opportunity to further diversify its revenue sources. As the GCC private wealth market continues to grow, almost doubling in size since 2010, understanding the underlying sub-segments is becoming increasingly pertinent. Private bankers can make significant gains by identifying one or more of these sub-segments, tailoring meaningful value propositions for customers. Today, almost half of the region’s wealth resides in Saudi Arabia (44 per cent), but the UAE has made notable gains. The UAE’s share of the GCC wealth has increased from 24 per cent to 30 per cent from 2009 to 2013. Together, Saudi Arabia and the UAE control 74 per cent of the region’s wealth, up from 71 per cent in 2009. High net worth individuals continue to account for the largest segment of the region’s wealth at 41 per cent, followed by ultra-high net worth individuals at 34 per cent. The GCC showed the most consistent growth since the ﬁnancial crisis compared to all other regions. Global and regional macroeconomics suggest that the GCC will remain an attractive, though challenging, wealth management market for the foreseeable future.

CUSTOMER EXPECTATIONS

In the GCC, social attitudes and expectations have changed at an incredible pace. This is influenced by a mostly youthful population of nearly 50 million, which is increasingly mobile and has greater access to international media and technologies. As a result, the disconnect between what customers expect and what banks in the GCC can deliver is more distinct than ever before. This is one of the key messages derived from EY’s conversations with more than 2,000 customers across Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain and Oman, analysis of 700,000 sentiments on social networks, and discussions with 28 leading banks and 80 banking industry leaders. There is a wealth of customer data on social media which is proving to be a huge opportunity

in terms of new product and service design for banks in the region. Addressing customer needs in an increasingly digital world means disrupting and rewiring existing business models for a fresh customer experience. But this investment has to be made wisely. EY research suggests that up to 50 per cent of retail banks’ net profit could be at stake if banks do not act now. While digital propositions may seem to be a distraction to the banking sector, innovation and digital disruption should not be curtailed on the basis of saving costs. On the contrary, a more innovative and digitally driven bank can identify new revenue sources and reduce costs while achieving an increase in customer satisfaction—thus allowing banks to further solidify their position in less favourable market conditions. This opportunity should not be ignored by any GCC bank.

End of day Commodity Futures Price Quotes for Crude Oil WTI (NYMEX) CLH16 - Crude Oil WTI (NYMEX) CL*1:33.08

52.00

Vol: 1117031

50.00 48.00 46.00 44.00 42.00 40.00 38.00 36.00 34.00 33.08 32.00 30.00

2000000

28.00

1000000

0 Nov 15

Source: NASDAQ

Dec

Jan 16

26.00 Feb

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11/02/2016 10:04

Some bonds are too strong to break.

As one of the most stable corporate banks in the UAE, Bank of Sharjah has built relationships with some of the region’s largest businesses, striving to offer the most solid, dependable and long-run banking solutions.

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26/01/2016 13:17

ISLAMIC BANKING SOFTWARE

Building a booming sector In a face to face interview, Path Solutions’ Group Chairman & CEO Mohammed Kateeb reveals to Banker Middle East what’s holding back digital transformation, the benefits of cloud computing and the future of the global banking industry

ow can Path Solutions help power the Islamic banking industry? How does it fill a niche market?

In the beginning, it seemed interesting to create a Shari’ah-based technology which would fit in with confidence with the growing market demand. And this is exactly what we’ve done. It’s just about finding that gap in the market and knowing how to fill it with the right solution. Path Solutions’ world-class Islamic banking platform enables Islamic banks to serve their customers with full confidence, greater efficiency, manage their Islamic banking operations more effectively, and meet the required reporting and compliance obligations. They will be able to easily create a wide range of Islamic banking products and services fully compliant with the stringent Shari’ah rules and accounting regulations, hence ensuring transparency of accounting and profitsharing, along with rigorous operational risk control.

In your opinion, how will modern technology and the rise of digitisation threaten the traditional way of banking? The 21st century brought about an allembracing convergence of computing,

Mohammed Kateeb from Path Solutions says that banks are looking to enhance their Islamic banking offerings through the use of innovative technology.

communications and data. Of course, it is radically changing the way we live, work, and think. It is clear that there is a paradigm shift taking place in the banking industry in the digital age. The race towards a new way of banking is already underway. Therefore, the era of the traditional banking is almost dead. It will either reinvent itself from the inside out or simply disappear as a fatality of

market forces, while digitisation continues to disrupt almost every area of financial services. This explosion of technology is changing the banking industry from paper and branches to networked banking services. All over the world, banks are looking for a technological solution to meet the challenges of a rapidly-changing environment. Industry professionals are convinced that investing in IT is critical. Its potential and consequences on the banking industry future are enormous. Advances in technology for instance are allowing for delivery of banking products and services more conveniently and effectively than ever before—thus providing the bank that competitive edge to forge ahead in the banking marketplace.

Compliance and regulations are challenging in many countries. How does Path Solutions manage a diverse and complicated global regulatory environment? First, creating client value is at the heart of what we do. This means that we help banks to meet regulatory requirements, improve risk management and meet the needs of their customers. In order to effectively manage more stringent and intrusive regulations

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in a highly regulated banking sector, we work hard to get a very good understanding of our business segment, regulatory and industry issues, as well as the competitive landscape in general. We make sure our team stays abreast of the rapidly changing regulatory requirements and the intervention across multiple jurisdictions, which is complicated further given the dynamic nature and differing pace of change.

It is clear that there is a paradigm shift taking place in the banking industry in the digital age. The race towards a new way of banking is already underway.

What are your thoughts on cloud computing? What are the pros and cons of cloud?

Let’s acknowledge the benefits of cloud computing first:  Cloud hosting enables banks to enjoy minimal expenditure. It removes the need for buying expensive software and paying for the licensing costs. Plus, the extra costs associated with increasing memory and hard drive space are all abolished.  Another advantage of cloud is accessing the environment of cloud not only from the system but through tablets and mobile phones.  An additional benefit is the centralised data. The information for multiple projects and different branch offices are stored in one location that can be accessed from remote places. Plus, it also insures automatic data backup and recovery; and the storage of data is free and limitless.  In addition to documents’ accessibility, cloud enables sharing too. All documents can be emailed and shared whenever required.  SaaS cloud computing applications offer lower total cost of ownership. SaaS applications do not need large capital investments for support infrastructure or licenses.

Today, cloud computing is transforming the way information technology is consumed and managed. With integrated safeguards the disadvantages of cloud computing can be minimised. In my opinion, the pros outweighs the cons of cloud. The minimised costs, sharing capabilities, easy access, data centralisation and backup, free storage and quick testing speak for themselves. The argument becomes even stronger with the increased flexibility and scalability it offers.

Are you optimistic about the future of the global banking industry?

I am looking at the future of the industry in a very optimistic way. In emerging markets, often the growth of the financial services sector is one-and-a half to two times greater than real GDP growth, which is encouraging for the sector. When I meet industry peers, they all share my enthusiasm, expressing more confidence in emerging markets. However, prospects for banks in the coming years vary widely by region, and many of them will face more difficult conditions than other types of industries. We can expect to observe continued leveraged buyout targets among global banks in particular regions, and the smallest banks will also become acquisition targets.

- Mohammed Kateeb

The benefits and drawbacks of cloud computing

So, these were the advantages. Now let’s check out the disadvantages of cloud computing:  Some cloud computing vendors have non-negotiable contracts. It can be disadvantageous for many banks.  For cloud computing, an internet connection is a must to access data. With a low bandwidth net, the benefits of cloud cannot be utilised. And its quality can get affected when lot of people utilise the net at the same time.  Of course, cloud computing does not provide the highest security for sensitive information, and banks can become vulnerable to hackers and threats.  Cloud software may look like an affordable option when compared to an in-house installation of software. But, it is important to compare the features of the installed software and the cloud software, as some specific features in the cloud software can be missing.  Cloud-based services do not always provide full support to clients. In addition, those services run on a remote server. Due to this, banks using cloud computing have minimal control over the functions of the software as well as hardware. Source: Path Solutions

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41 21/02/2016 11:28

ISLAMIC BANKING SOFTWARE

Stepping up Islamic banking growth Technology can provide impetus in the Islamic banking sector according to Ravi Pratap Singh, Executive Director & President â&#x20AC;&#x201C; Products, Nucleus Software

ow can banks improve their offerings to customers with the correct Islamic banking software?

Customers are demanding more, they want more convenience, more products offered across more channels, and they want more value. To respond, banks need to increase agility, improve product innovation capabilities and deliver process efficiencies. Banks are looking to implement solutions that help them digitise while delivering significant efficiency, cost savings and scalability improvements. In effect, banks need to overhaul the design of their end-to-end processes to offer a seamless experience to the customer. By doing so, banks can differentiate their services and sharpen their competitive edge. In many respects, Islamic banking is not very different because customersâ&#x20AC;&#x2122; expectations remain the same. While increasing competition and complexity of operations are putting pressure on margins, there is also a lack of standardised regulatory framework. And because many Islamic banks differ in terms of scale when compared to nonIslamic banks, it becomes even more important for them to adopt online and mobile channels while maintaining a single view of the customer. To further complicate matters, a lot of

Ravi Pratap Singh

Islamic banking processes are manual, involving physical documents and multiple layers of decision making. The right software can help the banks bridge these gaps effectively while driving organisational objectives for growth and improved customer service. Banks need to make targeted IT investments to simplify, redesign and automate processes, which can yield significant efficiency enhancements. Islamic banks need modular, flexible, high-performance solutions, which can provide differentiated product design capabilities and improved levels of operational excellence.

However, to reap the true benefits gained from implementing these tools, banks must be careful. For example, customers are keen to access banking on mobile but despite high smart phone usage; the penetration of mobile banking in the UAE still stands at 34 per cent, followed by 27 per cent in Kuwait, 19 per cent in Qatar and 15 per cent in Saudi Arabia. One of the key reasons for this low penetration is the lack of convenience and simplicity for the customers. I see this as an interim improvement opportunity where banks have taken the first move to a digital platform but have not taken the next logical step of enhancing customer experience.

Would you say the Islamic banking software market is one that is still in development, with the sector rapidly growing as Islamic finance grows in popularity?

Technology continues to develop at astounding rates, offering new challenges and opportunities to banks. Todayâ&#x20AC;&#x2122;s software for financial services firms is now sophisticated enough to take advantage of these opportunities, however the specialisation required for Islamic banking adds another layer of complexity. cont. on page 44

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ISLAMIC BANKING SOFTWARE

cont. from page 42

Until quite recently, Islamic banking was dominated by highly customised solutions, often developed in-house, but today, there is an increasing demand for more modern, specialised Islamic banking technology solutions. As Islamic banks continue to grow and compete more aggressively, they are keen to take advantage of what the new technology solutions have to offer. There is a growing requirement for solution partners who not only have deep business experience and technology expertise but also have proven credentials in delivery. There are very few solution providers who qualify on these criteria and yes, there is a lot of scope for further enhancement.

if you are looking for ways to enhance your credit quality by automatically filtering out the applications which do not comply with your credit policies, we can help you do it. Many Islamic banks today lack the ability to target their credit business approaches driven by deep analytics. With the huge growth of data, banks can gain a strategic advantage by using predictive insights to make improved lending decisions that are better aligned to current and future economic conditions. They can use predictive analytics to rapidly adjust to fast changing market conditions and steer their portfolios through uncertain times.

Islamic banks need modular, flexible, highperformance solutions, which can provide differentiated product design capabilities and improved levels of operational excellence. - Ravi Pratap Singh, Executive Director & President – Products, Nucleus Software Are there any software holes that need to be filled in the sector?

The modular design of today’s leading software solutions helps banks deploy the components they need, when they need them—for example, if they need to enhance their customer acquisition process or if they need to improve their collections business. Our solutions have been designed to be deployed this way. By supporting both on-premises and cloud-based deployment options, we help Islamic banks manage their cost bases efficiently as well. For instance, if you want to create and launch a new product in a matter of minutes [our product], FinnOne Neo for Islamic banking will help you do it. If you want to offer the widest set of products while delivering a market leading, omnichannel customer experience, FinnOne Neo will help you deliver it. Likewise,

What is your outlook for the growth of the sector in 2016?

EY’s recent World Islamic Banking Competitiveness Report showed that Qatar, Indonesia, Saudi Arabia, Malaysia, UAE and Turkey (QISMUT) will have a combined GDP of $4.8 trillion, a mostly young population of around 419 million, trade flows of $3.6 trillion, and banking assets of $6 trillion by 2018. Islamic banking assets with commercial banks in QISMUT have surpassed $801 billion in 2015, which represents 80 per cent of the international Islamic banking assets. By 2020, Islamic banking profit pool would reach $30.3 billion, out of which $27.8 billion is expected to come from these markets. Saudi Arabia, Qatar, Kuwait and Bahrain are seeing Islamic banks capturing market

share by outgrowing their traditional peers. We see a growing demand for specialised Islamic banking solutions as banks step up to realise the full potential of this sector.

What can Nucleus Software offer to banks for helping them compete and innovate?

For three decades, we have been working with some of the world’s most innovative financial services firms. We have built up a wealth of knowledge about global best practices—we know what works and what doesn’t work. And of course, we know how technology can help as well. We recognised that the Islamic banking market would evolve and there would be a need for specialist solutions. That’s why we created solutions with a unique combination of deep business expertise with the latest, proven technology. The result is a set of solutions that are uniquely placed to support agile business models. FinnOne Neo, our flagship solution which manages the entire loan lifecycle for Islamic banking, has been designed after exhaustive market and customer research and enables banks and finance companies to deliver outstanding customer experience while constantly innovating and responding to changing market demands. It has been designed to be delivered specifically via public or private cloud as well as on premise. Nucleus Software’s state-of-the-art mobility and analytics solutions, part of the FinnOne Neo solution, equip banks and other financial institutions to not only help meet customer expectations, but to drive growth through increased customer satisfaction. Our vision is to empower our customers to deliver world-class products and experience to their customers, and run their businesses efficiently and successfully.

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11/02/2016 10:15

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14/02/2016 15:14

AML REGULATIONS

European Commission looks at toughening AML regulations Authorities to put in place measures to stem the flow of cash to terrorist organisations

n 2 February, the European Commission (EC) presented an Action Plan to toughen up anti-money laundering (AML) regulations, particularly those around transactions involving cash, cultural artefacts, virtual currencies and anonymous pre-paid cards. These tighter legislative frameworks are designed to stem the flow of money going to terrorist organisations. European Commission First Vice President Frans Timmermans said, “We have to cut off the resources that terrorists use to carry out their heinous crimes. By detecting and disrupting the financing of terrorist networks, we can reduce their ability to travel, to buy weapons and explosives, to plot attacks and to spread hate and fear online. In the coming months the Commission will update and develop EU rules and tools through well-designed measures to tackle emerging threats and help national authorities to step up the fight against terrorist financing and cooperate better, in full respect of fundamental rights. It’s crucial that we work together on terrorist financing to deliver results and protect European citizens’ security.”

The Action Plan will focus on two main strands of action, firstly tracing terrorists through financial movements and preventing them from moving funds or other assets, and secondly disrupting the sources of revenue used by terrorist organisations, by targeting their capacity to raise funds. European Commissioner for the Euro and Social Dialogue Valdis Dombrovskis, said, “…We are moving swiftly to clamp down on terrorist financing, starting with legislative proposals in the coming months. We must cut off terrorists’ access to funds, enable authorities to better track financial flows to prevent devastating attacks such as those in Paris last year, and ensure that money laundering and terrorist financing [measures] are sanctioned in all Member States. We want to improve the oversight of the many financial means used by terrorists, from cash and cultural artefacts to virtual currencies and anonymous prepaid cards, while avoiding unnecessary obstacles to the functioning of payments and financial markets for ordinary, law-abiding citizens.” The European Commission is currently working on proposals for a number of targeted amendments to the Fourth Anti-Money Laundering Directive.

These points are firstly: enhanced due diligence measures/counter-measures to be taken towards high risk third countries; the Commission will amend the Directive to include a list of all compulsory checks (due diligence measures) that financial institutions should carry out on financial flows from countries having strategic deficiencies in their national anti-money laundering and terrorist financing regimes. Applying the same measures in all Member States will avoid having loopholes in Europe, where terrorists could run operations through countries with lower levels of protection. Secondly, look at virtual currency exchange platforms to prevent their abuse for money laundering and terrorist financing purposes, the Commission proposes to bring virtual currency exchange platforms under the

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scope of the Anti-Money Laundering Directive, so that these platforms have to apply customer due diligence controls when exchanging virtual for real currencies, ending the anonymity associated with such exchanges. Thirdly, it will look at prepaid instruments, such as prepaid cards, the Commission proposes to lower thresholds for identification and widening customer verification requirements. Due account will be taken of proportionality, in particular with regard to the use of these cards by financially vulnerable citizens. The Commission will also enhance the powers of EU Financial Intelligence Units and facilitate their cooperation. This entails the further alignment of rules for such Units to the latest international standards, and finally it will look at providing the Financial Intelligence Units

with swift access to information on the holders of bank-and payment accounts, through centralised registers or electronic data retrieval systems at national level. The EC is also assessing the need for a specific EU regime for the freezing of terrorist assets. At the same time, a comprehensive common definition of money laundering offences and sanctions across the EU will avoid obstacles to crossborder judicial and police cooperation to tackle money laundering.

DISRUPTING SOURCES OF REVENUE

Illicit trade from occupied areas is currently a primary source of revenue for terrorist organisations, including trade in cultural goods and the illicit wildlife trade. They can also gain from trade in legal goods. The Commission and the European External Action Service will provide technical assistance to Middle East and North African countries to fight against the trafficking of cultural goods and provide support to third countries to comply with United Nations Security Council Resolutions in this field. Countries in the Middle East, North Africa and Southeast Asia will also receive support to improve the fight against terrorism financing.

cont. overleaf

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(Background image: Copyright: chattanongzen/Shutterstock.com)

(Copyright: Bogdan Vija/Shutterstock.com)

The EC is in particular looking at tightening the regulations around the use of prepaid cards and virtual currencies, as well as the trade in cultural artifacts.

As part of the enforcement of EU sanctions against Syria and Iraq, the Commission is already undertaking a number of actions against the looting and trade of cultural goods from those countries. These include: providing information to EU member states on aspects of border procedures not explicitly covered by the existing sanctions regulations; circulating so-called ‘Red Lists’ which classify and illustrate the endangered categories of archaeological objects or works of art that are protected by national legislation in Iraq and Syria, and are vulnerable to theft, looting and subsequent trafficking; offering training as of 2016 for customs officers from EU Member States to give them greater expertise in identifying suspicious consignments and using relevant online databases such as Interpol’s Stolen Works of Art. Commission services are now considering the best possible means to combat the illicit trafficking of cultural goods, including through adoption of EU legislation in this area. Options that will be considered involve the introduction of a certification system for the import of cultural goods into the EU coupled with guidance to stakeholders such as museums and the art market. The Commission will put forward a legislative proposal by the second quarter of 2017. At present the EU implements the UN resolutions regime under the Common Foreign and Security Policy in order to freeze the assets of persons, groups and entities involved in terrorist acts and subject to restrictive measures, such as persons and groups linked to Al-Qaeda or ISIL/Da’esh. However, the Treaty includes the possibility for the EU to define a legal framework for administrative measures with regard to capital movements and payments, such as the freezing of funds, financial assets or economic gains of persons or groups. This could be used to freeze the assets of terrorists posing

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AML REGULATIONS

cont. from page 47

(Copyright: Chamille White/Shutterstock.com)

a threat to EU internal security. Such a system could be applied for example for perpetrators of terrorist attacks on European soil who, unlike the already existing measures, have not established links to international terrorist groups. The Commission will assess the need for and possible benefits of an EU regime.

VIRTUAL CURRENCIES AND TERRORISM

There is a clear risk that virtual currencies may be used by terrorist organisations to conceal financial transactions, as these can be carried out more anonymously. The EC is planning to bring virtual currency exchange platforms under the scope of the Fourth Anti-Money Laundering Directive, in order to help identify the users who trade in virtual currencies. In addition, the Commission will examine the possibility of applying the licensing and supervision rules of the Payment Services Directive (PSD) to virtual currency exchange platforms, as well as virtual ‘wallet providers’. This will promote better control and understanding of the market and ultimately help prevent money laundering and terrorist financing. Virtual currency exchange platforms may be considered as ‘electronic’ currency exchange offices that trade virtual currencies for real currencies (or so-called ‘fiat’ currencies, such as the euro). On the other hand, virtual currency wallet providers hold virtual currency accounts on behalf of their customers. In the ‘virtual currency’ world, they are the equivalent of a bank offering a current account. They

The European Commission plans to tighten the legislation in the Fourth Anti-Money Laundering Directive.

store virtual currencies and allow for their transfers to other wallets/virtual currency accounts. There is a growing consensus that virtual currency exchange platforms should be subjected to ‘know-yourcustomer’ rules under the Fourth AntiMoney Laundering Directive, which will have to identify and verify the identity of the person exchanging virtual currencies for real currencies and vice versa. While several jurisdictions in the world have issued warnings about the risks that virtual currencies may entail, none have actually banned them. Virtual currencies are often considered as a useful tool for rapid international payment transfers and low cost money remittances. To date, virtual currencies represent an innovative but rather small market. The European Central Bank in its last report on virtual currencies (February 2015) concluded that virtual currencies entail certain risks but do

We must cut off terrorists’ access to funds, enable authorities to better track financial flows to prevent devastating attacks such as those in Paris last year, and ensure that money laundering and terrorist financing is sanctioned in all Member States. - European Commissioner for the Euro and Social Dialogue Valdis Dombrovskis

not at this point in time pose a threat to financial stability due to their still limited size–around 70,000 transactions are made daily on virtual currency platforms, worth around EUR 40 million.

PREPAID CARDS AND TERRORISM

Prepaid cards have been used by terrorists to anonymously finance terrorist attacks. Whilst the Commission fully acknowledges that prepaid instruments are beneficial for many citizens, including those people who are economically vulnerable or financially excluded, it is also aware of the risks stemming from the anonymity of some of these cards. The Commission intends to amend the Fourth Anti-Money Laundering Directive to address these concerns without doing away with the benefits that these cards offer when used normally. The majority of prepaid cards need to be activated online before they can be used. Requiring distributors to verify the identity of their customer—a process defined as ‘customer due diligence’—at the time of the sale, can dissuade the purchase of the card and undermine its distribution. The Commission is currently examining ways to ensure that customer due diligence is carried out by the time the card is activated.

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VAT

in UAE looms

Stuart Halstead, Director, Indirect Tax at Deloitte Middle East, looks at the impact of VAT on businesses operating in the GCC and the unique case of financial services

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VAT ONLY CREATES AN ADMINISTRATIVE BURDEN, USUALLY

GCC member stages are still working out the way forward for taxation in their economies.

(Copyright: Prachaya Roekdeethaweesab/Shutterstock.com)

ne of the most attractive features of VAT for governments is that the business community takes responsibility for charging, collecting and remitting the tax to the authorities. Unfortunately these obligations can pose something of an administrative challenge for businesses, particularly for those businesses that have not had prior experience of managing such a tax before. That being said, VAT obligations can be managed well and be relatively easily integrated into day to day operations. Prior planning is key, as is effective ongoing oversight of the VAT accounting processes. In many cases, the additional costs associated with the administration of VAT are the primary costs associated with the tax, in addition to perhaps a oneoff up-front increase to working capital requirements to cover the interim carry cost of initial VAT outlays pending refunds. That is to say that many businesses are what is referred to as ‘fully taxable’ for VAT purposes; any VAT incurred on business expenses can generally be recovered in full. But this somewhat benign VAT impact on business is not always the case. Indeed, for those industries that are not usually in a position to recover VAT in full on the purchases that they make (often referred to as ‘partially exempt’ or ‘input taxed’)—a group that traditionally includes financial services providers–incurring VAT can create an absolute tax cost, in addition to any increased administrative costs.

FINANCIAL SERVICES PROVIDERS HAVE TRADITIONALLY NOT BEEN LET OFF SO LIGHTLY

To understand why this is the case you need to unpick the design of VAT somewhat, and consider the underlying principles at play which have led to VAT designers from prevent financial services providers from recovering VAT (in whole or in part) in the first place. The appropriate VAT treatment of financial services is a topic that has generated a significant amount of debate since the first European countries adopted the tax in the 1960s. Indeed, finding an optimal approach to the VAT treatment of financial services has remained something of a global challenge ever since. cont. overleaf

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VAT

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Many argue that financial intermediation—that being the act of bringing borrowers and savers together—and which is at the heart of a great number of banking transactions should not be subject to a consumption tax such as VAT, the argument being that financial intermediation is not in itself consumption, rather it is the means by which consumption can be effected. By taxing such arrangements, economic distortions are likely to be introduced (i.e. savers save more and borrowers borrow less than might otherwise be the case), whilst corporate decision making may similarly be impaired is how the argument concludes. On the other hand there is growing view that most if not all observed transactions within an economy (including those undertaken by financial services businesses) should be subject to VAT. Yet even if there is an intention to tax financial services, further questions emerge. The complexity of financial intermediation creates real difficulties when trying to establish the quantum of what, precisely, the ‘value added’ actually is for the purposes of imposing the tax, and thereafter allocating input tax credits to purchasers (a pre-requisite under the almost universally adopted invoice-credit VAT system). The ordinary equation for establishing value added (sales of goods of services less purchases) simply does not hold in the financial services sector; the value added can often be invisible, being deeply embedded in a range of interest rate spreads and other financial margins. At any point in time it may well be impossible for either the financial service provider or the recipient of their services to accurately establish the true value added in respect of an individual supply. One approach to the valuation challenge is that of VAT exemption, the effect of which is that effective taxation is achieved but on inputs rather than

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The ordinary equation for establishing value added [sales of goods of services less purchases] simply does not hold in the financial services sector; the value added can often be invisible, being deeply embedded in a range of interest rate spreads and other financial margins. - Stuart Halstead, Director, Indirect Tax at Deloitte Middle East

on outputs. But by its very nature, VAT exemption is not one that addresses the economic distortion risk and indeed is often the weakness targeted by those seeking to challenge the typical status quo observed globally. Potentially exemption results in: under-taxation of consumers (as a result of inputs and not outputs being valued and taxed); a loss of revenue for the public treasury (as outputs are not being effectively valued); over-taxation of business borrowers (as a result of cascading unrelated VAT costs into business banking charges); and inefficient in-source bias amongst financial service institutions. Exemption is, in short, potentially as distortive to the overall functioning of the intermediation market as full taxation would be. Nevertheless, VAT exemption is by far the most extensively deployed policy tool with respect to the VAT treatment of financial services witnessed globally; whether it is the right policy tool is of course at the heart of the matter. Some countries have, by default or by design, attempted to address the shortcomings of VAT exemption. In the case of New Zealand, business to business transactions are zero-rated. As opposed to exemption, zero-rating enables the financial service provider to recover VAT incurred on associated costs. In Singapore, a specially designed VAT recovery regime exists for financial services businesses enabling them to recover relatively (compared to what might be the case in Europe for instance) large amounts of VAT on costs incurred.

But as yet no single best practice has emerged as the leading candidate for wholesale revalidation of the tax treatment of the financial services sector. In certain instances this is down to a desire to retain simplicity on the part of governments. In other cases it is due to the highly theoretical, technical and administratively cumbersome aspects of the alternatives amongst other things. In short, the alternatives to exemption are themselves imperfect.

VAT EXEMPTION FOR FINANCIAL SERVICES IN THE GCC

A recent statement made on 7 December 2015 by Younis Haji Al Khoori, Undersecretary of the UAE Ministry of Finance, indicated that the member states are still considering their options on how to treat financial services. Based on global norms it would be expected that exemption, in some form or another, will apply–albeit the extent of products covered remains to be seen. Bearing in mind that increasingly financial services are subject to discrete charges, it may well be that only those products for which no discrete charge is levied would be treated as exempt. Likewise it remains to be seen how input tax incurred by the sector will be dealt with and whether a Singaporean style approach would be taken. Whatever the outcome, however, the industry is more likely than not to be one of the more impacted by the introduction of VAT in the region.

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AWARDS

QATAR

Qatar Product Awards 2015 winners Five Qatar banks win top honours at the 2015 edition of the Banker Middle East Qatar Product Awards

The Awards were received from Robin Amlôt, CEO of CPI Financial, by Dr. R. Seetharaman, CEO of Doha Bank and Senior Management from the Retail Banking, Treasury Investment and Technology departments at a ceremony held in Doha.

oha Bank and Al Khaliji Bank each won four Awards in the 2015 Banker Middle East Qatar Product Awards. Doha Bank won Best Forex, Best Web/Mobile Banking Service, Best Savings Account and Best Co-branded Credit Card, while Al Khaliji Bank were awarded the Best Premium Banking Service for the second year running, as well as the Best Corporate Account, Best Current Account and Best Call Centre Awards. Dr. R. Seetharaman, CEO of Doha Bank and Senior Management from the Retail Banking, Treasury Investment and Technology departments received the Awards on behalf of Doha Bank. “The Awards indicate the success of Doha Bank’s business strategy across key verticals,” said Dr. R. Seetharaman. “To come up trumps at the Banker Middle East Industry Awards is always special as the criteria for making the grade are so stringent, and you clearly need to be a cut above the competition to win in any category. These awards are an acknowledgement for innovative offerings to our customers using technology. The awards are also a source of great encouragement for us to push our limits in creating products and services that meet the changing needs of our customers.” Doha Bank bagged the award for Best Forex Trading Service thanks to its industry-leading range of margin trading products and corporate hedging solutions for cross-border transactions that have been seeing increased demand. The Bank, which offers forex services from 7.15am to 8pm from Sunday through Friday, also provides the best forex rates for expat customers for remittances to their home countries. The Lulu Doha Bank Shopping Credit Card, winner of the award for Best Co-Branded Credit Card, offers

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an unbeatable value proposition on everyday spends, with cardholders saving on every purchase via shopping points each time they shop at Lulu stores in Qatar. It is the only product of its kind to allow customers to enjoy instant savings on groceries as the points earned can be redeemed without any limitations or restrictions, and customers are further kept engaged in a year-round calendar of offers and promotions. “The Banker Middle East Qatar Product Awards identify those institutions leading their respective fields in banking and financial services in Qatar. The results of these peer-voted Awards clearly define best practice and excellence in products and services,” said Robin Amlôt, Chief Executive Officer of CPI Financial, publisher of Banker Middle East. IBQ won the Best Customer Service—Corporate, Best Customer Service—Retail, and Best Customer Loyalty Programme awards, Mashreq took home the Best Cash Management, Best Treasury, and Best Trade Finance awards, and QNB was awarded the Best Managed Advisory and Best SME Customer Service awards. This latest award for QNB tops off what has been a fantastic year for the Bank which has seen it awarded a number of awards throughout the past 12 months as well as having enjoyed continued financial success. “A frequent recipient of the Banker Middle East magazine’s Awards, QNB is always committed to providing outstanding banking services to all its clients in Qatar and abroad across its international network by constantly introducing new and innovative products and services specially tailored to serve them and fulfill their requirements in all banking categories,” according to the Bank.

The 2015 edition of the Awards saw record voting numbers across all categories. Qatar’s economy is currently one of the strongest in the GCC region, and banking is a rapidly growing sector. The Banker Middle East Awards Product programme is open to banks and financial institutions in nine countries across the MENA region. Separate Awards schemes are being run in the UAE, KSA, Bahrain, Kuwait, Oman, Qatar and the Levant (Palestine, Jordan and Lebanon). The Awards are based on a peervote process. The results are NOT decided internally by Banker Middle East; further, they are NOT chosen by a small panel of judges. The Banker Middle East Product Awards recognise banking products and services that are either exceptionally innovative or have generated excellent financial results and/or transference of market share.

“The Banker Middle East Product Awards identify the best products and services available in banking and finance in the Middle East,” said Amlôt, “This year our Awards programme has been designed to assist both retail and corporate customers by doing so on a country-bycountry basis, naming the top products and services in nine countries across the Middle East—watch this space!” The nomination process for the Banker Middle East Product Awards is straight-forward. Institutions may nominate their products and are invited to provide supporting information to justify their nomination(s). Only registered readers of Banker Middle East, or its sister publications Banker Africa , Islamic Business & Finance , WEALTH Arabia and FinanceME, together with registered users of our real-time financial news website www.cpifinancial.net are eligible to vote.

The winners Best Premium Banking Service Best Corporate Account Best Current Account Best Call Centre Best Forex Best Web/Mobile Banking Service Best Savings Account Best Co-branded credit card Best Customer Service - Corporate Best Customer Service - Retail Best Customer Loyalty Programme Best Cash Management Best Treasury Best Trade Finance Best Managed Advisory Services Best SME Customer Service

Al Khaliji Al Khaliji Al Khaliji Al Khaliji Doha Bank Doha Bank Doha Bank Doha Bank ibq ibq ibq Mashreq Mashreq Mashreq QNB QNB

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IN-DEPTH

Facing the fintech disruption Cyril Gourp, Principal A.T. Kearney and Mukund Bhatnagar, Principal A.T. Kearney, discuss what banks can do to add value to their business interactions in the face of the cheaper fintech options

ow disruptive are fintechs in the financial services world; how real is that for the MENA region?

Mukund Bhatnagar: What is a fintech? This is an evolving term. Fintechs are typically technology companies which are rethinking the financial services value chain and the customer journey, and coming up with innovative ways of offering similar services as the banks do. They do this at a much lower cost and now in

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completely new way, which is improving the customer experience overall. As an effect they are actually threatening the traditional business models of the banks. They are in some ways coming in between customers and banks and disintermediating the banks so they get less and less of the profits. The fintechs take the cream. Financial services is a very broad term and fintechs also play in a very broad arena; in payments, in the cards that we use or any kind of online payment that we do. They also get into asset management and wealth,

investments, as well as in traditional banking products such as personal loans etc. Fintechs are not a new phenomenon. Bill Gates spoke about fintechs disrupting the banks way back in 1994, so it is not new. However, in the last three years, the investments that have come from venture capital firms into fintechs has grown dramatically. It is not just this region, but starting from Silicon Valley and that is something that the banks need to wake up to and respond to. cont. on page 58

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Cyril Gourp: More and more we see fintechs in financial services, on your smartphone, on your tablet. Last year the VC investment in fintech reached $12 billion, since 2010 there has been a 70 per cent increase in investment per year in fintech firms. In more mature markets, we see financial services struggling to remain profitable, with very low interest rates. So the gap of competitiveness is under pressure for banks.

What can the banks do to face that disruption or challenge that the fintechs are posing?

Bhatnagar: You have to think of it as a story of two worlds, because in more developed markets the threat of fintechs is happening right now, then you have the MENA region where there is a little bit of a lag. You are probably going to see the same pressure on the banks that the developed markets see today maybe six months to a year down the line. The banks are looking at combatting the growth of the fintech segment in four ways; they are investing in these fintechs—buying equity in them. Keep your friends close, your enemies even closer. Secondly some banks believe in the business model of a fintech and the banks are outright purchasing them. Thirdly, some banks are partnering with fintechs, so it is more a relationship of equals. They are coming together and figuring out a way where each is doing their thing and sharing the value. Last but not least, banks that don’t find the opportunity to buy, invest or partner try to replicate the fintech environment internally. They create their own in-house incubators and innovation labs and are trying to replicate the start-up fintech mentality in-house. So these are the four typical responses that we see. In the region they are looking more at partnering or investing in fintechs, they have not really set up innovation labs here and they are not really outright buying any fintechs so far.

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If the banks don’t play the game as well as the fintechs are doing, they will still be there but they will shrink in size and be less profitable than before so the whole value will go down dramatically.

- Mukund Bhatnagar, Principal A.T. Kearney

What happens to the banks that don’t do one of those four options?

Bhatnagar: What do fintechs do? They come in between you and your customers. However, we do not imagine a future where banks are gone completely. Banks have a physical infrastructure that they have set up over the last 200 years. That is still required. They generate value not only because of the infrastructure, but also the quality of their products and the services that they offer. If someone else offers those products and that quality, creating a wall between you and your customer then they will take the margins away from you. If the banks don’t play the game as well as the fintechs are doing, they will still be there but they will shrink in size and be less profitable than before so the whole value will go down dramatically. At the end of the day if someone else is offering the same products and they are in between you and the customer, you cannot go and cross-sell to your customers. The traditional bank model was to sell one product such as a current account then the bank also makes money out of a personal loan, a mortgage etc. But, if someone is between you and your customer then you can’t even cross sell to them. It is a spiral downhill for the banks if they don’t play the game well enough. Gourp: If you have less of a connection with your client, it is a lost opportunity to get information

about this client. We know that today customer information is important. In some cases when it comes to pricing, bundling of offers etc., you lose opportunity without the right information. There are some banking apps which are very much focusing on customer expectations in terms of interface on the front end. To compete with fintechs, banks need to fully reorganise themselves. It is not only about providing the front end with new technologies and value-add services. We see in the market some initiatives which are very much frontend focused, but doesn’t yet go up to the back end of the organisation and infrastructure. That is a big challenge for the banks in the region, it is not only about finding new ideas, but it is also about being competitive with fintechs from very specific business lines and services. Bhatnagar: This is a very important point. Banks’ earlier classic model was branches, then they moved their products and services online and had a nice website. A lot of us in our generation stopped going to the branches. Now the new wave is to get everything on your mobile, so that is what the banks are doing. Some things work well and they are rapidly improving and are getting to a world class level on that. Fintechs are different. What banks are doing is taking the old way of doing business and putting them on your PC or cont. on page 60

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mobile, but the innovation is on the interface, but not on how you do business. Now you go to the bank after having decided what we want in terms of banking products. Our decision making is much earlier in the process. Our parents’ generation would go to the branch manager, sit down with the banker, get information, then make a decision, but we already decide when we first have contact with the customer. This is a journey that is being reimagined in a different way by the fintechs and this is the threat. The banks by just putting their interfaces on the internet or the mobile are not reimagining the customer journey, they are just transferring the same journey onto a different interface and that is just a half a step in the right direction.

What can the banks provide that fintechs cannot?

Gourp: One of the key things is trust. Today fintechs have been successful in the introduction of opportunities, whether we speak in some cases of payments, services, whether we speak about lending as well, it is very much transactional. When it comes to putting money away, savings etc., that is where fintechs really struggle to compete and to find trust with customer. We see a lot of initiatives in this space. For example asset management in the US: VCs have invested billions of dollars, but actually at the end, fintech asset management offerings are only just managing to attract a couple of billions of dollars under management from clients. When it comes to trust a fintech will never manage to build the trust. That is also where we typically see collaboration opportunities for fintechs, especially when they try to move more into value added services. That is where the trust of the bank, the technology and the bank model could be a good combination.

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Cyril Gourp

Last year the VC investment in fintech reached $12 billion, since 2010 there has been a 70 per cent increase in investment per year in fintech firms. - Cyril Gourp, Principal A.T. Kearney

Bhatnagar: If I were to borrow money—take a financial institutions money—I don’t really care where it comes from as long as the pricing is good and it is convenient. When I have to give my own money then I really need to do a very thorough check because I need to get it back at some point. There is a whole trust angle and a maturity angle which is very crucial and that is where the banks can really play. Having said that the fintechs over a period of time will build that trust. It comes with time. So the banks have to think about this advantage that they have now, but they also need to remember that this advantage won’t be there a few years

down the line. The urgency of action has to be there. What we see with banks here in the region specifically is this misplaced confidence, they believe that fintechs are a more mature market phenomena. They don’t have the sense of urgency at this point in time we advise clients to reprioritise and to think of it not as something in the distant future, but as something that is already knocking on their door, because getting ready to face the fintech challenge itself takes time. There is inertia, you are used to doing your business in a certain way, and banks need to start pushing this idea right from the top because it is not an easy thing to do.

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COMPANY PROFILE

Bank of SharjahCommerzbank partnership The new partnership will offer clients exciting investment opportunities, according to Rami G. Sayegh, Head of Private Banking Wealth Management, Bank of Sharjah

Rami G. Sayegh

ank of Sharjah and Commerzbank AG, one of the leading banks in Germany, signed a cooperative agreement in 2012 to offer the best in wealth management and investment solutions. Bank of Sharjah Private Banking Wealth Management division was created by experts to find and deliver the right products to individual and corporate investors with customised advice and unique solutions tailored to their needs and adjusted according to local demands and market requirements. The entity gives the opportunity to open an offshore account at Commerzbank AG and access a diversified offering

of sophisticated financial products; it provides as well a complete onshore private banking and wealth management platform with a specially trained and dedicated team to ensure the highest level of service. It is part of our philosophy to offer comprehensive all-around advice and to provide innovative solutions that are tailored specifically to clients’ needs. We have structured our approach into advisory solutions and investment solutions which could be used separately or combined.

With our cooperation partner Commerzbank, we are able to offer German quality wealth management with a strong Emirates heritage and provide full access to our integrated capabilities at Bank of Sharjah. Commerzbank is one of the world’s leading dealer banks in physical precious metals. Physical gold (coins and bars) can be purchased offshore with Commerzbank AG at guaranteed competitive pricing, with storage facilities in Europe, and being a major shareholder of Argor Heraeus, one of the biggest gold refiners in Switzerland. Physical gold exposures of clients can also be managed by Commerzbank or used as collateral, giving clients the access to the very attractive European interest rate environment. Major trends are definitively the search for purchase power preservation as easy monetary policy becomes a global phenomenon and the search for diversification (geographically and via asset allocation). Through the partnership we can respond to these concrete needs. By utilising Commerzbank’s international locations we can offer geographical diversification, with Bank of Sharjah being a local direct contact. Physical gold still remains the asset class in connection with purchase power protection.

With our cooperation partner Commerzbank AG, Bank of Sharjah reflects the best of both banks, providing wide range of benefits such as:  Access to traditional and alternative investment opportunities tailored by a German bank.  Exclusivity to open an offshore account in Europe, while managing the client relationship at Bank of Sharjah.  Onshore advisory service and access to all major worlds’ capital markets.  Direct access to physical and non-physical gold and other precious metal assets.  Attractive equity release and Lombard loans to utilise fixed assets and existing portfolio.  Bespoke company structuring and succession planning. Source: Bank of Sharjah

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CMY

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16/02/2016 13:05

TECH FOCUS

The undeniable ripple effect Financial challenges are the biggest barriers to internet-driven economic growth in the GCC according to Hermann Riedl, Partner and Managing Director at BCG Middle East

ver the past decade, major technological developments have punctuated and redefined the GCC’s digital landscape, giving rise to thriving, highly-advanced internet economies. In line with this, the region’s online industry has, in recent years, yielded a myriad of ‘firsts’: telecommunications companies in Saudi Arabia and the United Arab Emirates (UAE) were the first in the Middle East to roll out 4G mobile networks. In parallel, when it came to building a fibre-optic broadband infrastructure, the UAE and Qatar were significantly ahead of the curve compared to their Middle Eastern counterparts. Moreover, at present, the GCC boasts one of the highest smartphone penetration rates in the world. On the social media front, both these countries’ numbers are equally impressive. Recent reports show that, in Saudi Arabia, YouTube amasses more than 90 million views daily. In addition, in 2014, research revealed that the UAE had the highest LinkedIn penetration in the Middle East with 1.6 million active users; the study also found that the UAE had the highest Facebook penetration rate with 44 per cent.

Hermann Riedl

cont. on page 66

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21/02/2016 11:37

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TECH FOCUS

cont. from page 64

As a result of these figures, both the UAE and Saudi Arabia have, over the years, witnessed robust e-intensity growth. And the Boston Consulting Group’s (BCG) global 2015 BCG e-Intensity Index, a tool that measures the maturity of 85 internet economies based on three core components— enablement, engagement, and expenditure—is a powerful testament to that. Released at the end of 2015, BCG’s e-Intensity Index provides a detailed overview of the depth and reach of digital activity of 85 internet economies—including all 28 members of the EU, most of Latin America and Asia, and 14 African countries—as well as gauges each country’s supply of Internet infrastructure and demand for and use of Internet services. Ranked 30th and 45th, respectively, the UAE and Saudi Arabia managed to edge out a slew of other nations in the Index—thanks to the strong maturity of their Internet economy. Despite their positive Index scores (129 for the UAE and 88 for Saudi Arabia), however, the vast internet potential of these countries is still relatively untapped—especially considering that they each enjoy a high GDP per capita. More importantly, their respective oil and gas sectors significantly contribute to their national GDPs. This, of course, begs the question: why are two nations with such high Internet usage and GDPs per capita lagging behind their Western peers— countries such as Belgium, Ireland, Spain and Czech Republic—when they could be leading the way? The answer to that question is multifaceted. In the UAE and Saudi Arabia, and across business-to-business (B2B) and business-to-consumers (B2C) sectors, the e-commerce market remains underdeveloped compared to that of Western economies. Still, in the

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Ranked 30th and 45th, respectively, the UAE and Saudi Arabia managed to edge out a slew of other nations in the Index— thanks to the strong maturity of their Internet economy. - Hermann Riedl, Partner and Managing Director at BCG Middle East

business-to-government (B2G) realm, both governments typically perform well above Western benchmarks. It is no secret that, in terms of sheer magnitude, scale and reach there is no company in the GCC that functions as the equivalent of an ‘Amazon’ or an ‘eBay’, for example. And that is due to a plethora of factors that include the size of the region’s markets (which are relatively small); the complex, logistical challenges posed by the lack of street addresses; and the GCC’s still maturing start-up culture and ecosystem. Interestingly, however, above and beyond these issues, the most critical impediment to e-commerce growth is the uncertainty surrounding payment methods. In the GCC, many potential e-commerce customers are uncomfortable shopping online for security reasons—because they don’t trust the website. In fact, according to Aramex’ E-Trends Arabnet 2014 report, the MENA e-commerce market is a Cash on Delivery (COD) one—in 2012 alone a staggering 71 per cent of e-commerce consumers in the region used COD. And in 2013, that figure jumped to 74 per cent. The analysis also revealed the various factors that, in 2012-2013,

influenced Saudi buyers’ preference for cash: 35 per cent claimed that they didn’t actually have a credit card; 18 per cent said that they didn’t trust online payments; 25 per cent stated that they believed that cash was easier; and 18 per cent simply explained that they preferred cash. Another four per cent didn’t offer a specific explanation. Based on these numbers, it is clear why GCC-based e-commerce platforms such as www.souq.com and www.namshi.com offer cash payment options—an alternative that may guarantee peace of mind but one that also tremendously increases costs. So, what can GCC states do to dismantle these e-commerce barriers and ensure the adoption of advanced ICT tools? The first obvious answer is to continue to invest in building a cutting-edge fixed and mobile broadband infrastructure. But this only scratches the surface of the issue. Today, what policymakers and ecosystem players in the region must really do is go beyond the scope of infrastructure investments and support the development of a fullfledged, ICT-enabled e-commerce ecosystem. This inevitably entails nurturing a forward-thinking digital startup environment and promoting the benefits of e-payments—by incentivising GCC consumers to make non-cash transactions. Financial institutions must also do their part by protecting consumers and providing them with maximum online payment security via fraud detection techniques and the like. The truth is, the GCC’s banking industry—and the regional financialservices landscape as a whole—has much to gain from the success of transaction-banking e-businesses. After all, these serve as a key source of reliable revenues and a linchpin of customer relationships and loyalty.

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21/02/2016 11:37

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TECH FOCUS

To catch a cyber thief In order to catch a thief, you need to think like a thief, claims Simon Goldsmith of BAE Systems

s with all criminal behaviour, cyber-attacks are not invisible—they leave tracks. But the traditional technologies that are deployed to prevent, detect and respond to cyber-attacks 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 cyber-threats. Typically attacks take two forms:  The first uses covert and highly 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;  The second uses more complex malware which can adapt itself to avoid detection thereby increasing scale, distribution and ratios of success. The following examples illustrate our work assisting financial institutions and law enforcement agencies worldwide to combat cyber-crime.

68 page 68-70 Catch a Thief.indd 68

between the command centre and the malware that it controls. This meant we could track every move the criminals made and identify which banks Shylock were instructed to attack and how. Shylock infected more than 100,000 computers, mostly in the UK, but also in the US. The malware was transferring millions of pounds a year from unwitting bank customers to the Russian-speaking gang who created it. In a joint operation in 2014 law enforcement agencies took action through the seizure of servers that controlled the trojan system, and by taking control of the domains Shylock used for communications between infected computers.

DRIDEX

Simon Goldsmith, Director for BAE Systems’ Cyber Security Commercial Sectors in the Middle East

SHYLOCK

We encountered Shylock in 2013—a particularly sophisticated piece of criminal software designed to steal from banks. After an intense process of unwinding Shylock’s logic to understand how it was built, we were able to understand the communications

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 in July 2014. Since then, Dridex rose to become one of the top cyber-criminal 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.

BETTER DEFENCE

Why do so many financial institutions still find themselves the victims of successful cyber-attacks, in spite of many layers of protection and significant investments in cyber-security? Partly this is explained by criminals continually innovating and finding new ways to circumvent defences and cont. on page 70

www.bankerme.com

24/02/2016 14:35

The region’s most transparent awards

The BME100, a list of the region’s top-performing banks, is not only a benchmark in bank performance, but the judging process is unequivocally transparent. Each bank is ranked according to its financial performance relative to other regional banks, there are no grey areas. Every bank’s financial data is carefully scrutinised by our in-house analytics team and each bank is ranked in our BME100 list according to that financial data. Our analysts use the Data Envelopment Analysis (DEA) method for analysing the efficiency of the banks in the BME 100. The analytical framework of our BME100 reports is based on secondary data drawn from the annual reports of the major financial institutions and Islamic windows around the MENA region. In our analysis we measure the performance of the whole banking sector of the countries against each other and compare the best banks of each country against each other. Where annual reports are not publically available on the institution’s website for the year in question, the institution is not included in the analysis.

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Results are collated in the currency in which they are originally published and are then converted into US dollars and normalised before the institutional rankings are calculated. The currency conversions are carried out using the prevailing exchange rate at the end of each year and as published by the relevant Central Bank. The institutions are ranked according to both the absolute size of and the dollar value increase in size of the following: Assets Liabilities Income Net profit The rankings obtained within these areas are then combined to create an overall ranking.

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28/01/2016 11:17

TECH FOCUS

cont. from page 68

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 professionalised 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.

COUNTERING 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. 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’ cyber-activity 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 cyber-threat. 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 uninvestigated.

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The solution is obvious, but not simple. Security operations need to be brought together and integrated into a single workspace

- Simon Goldsmith, Director for BAE Systems’ Cyber Security Commercial Sectors in the Middle East Moreover, as the analysts who work in Security Operations Centres (SOC) will testify, information overload is not just down to false positives. 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. Success lies in three fundamental areas, all based upon scalable, fast and robust data storage and querying:  Threat Intelligence Management – ingesting and managing multiple threat intelligence sources, enabling you to quickly transform intelligence into actions that enhance defences;  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;  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. 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. 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.

www.bankerme.com

24/02/2016 14:05

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PERSONALITY

Rola Seifeddine from the Access Bank UK

I have been in the marketing field for over 15 years now, I started off in an agency in Lebanon, handled several international accounts, such as Nescafe and McDonald’s as well as some luxury brands—I moved to the UAE in 2005. I was headhunted by Noor Bank before they opened, I started with them six months prior to their launch, I worked on the launch with the marketing department. I spent almost four and a half years with Noor, then moved to HSBC Amanah where I was their Global Marketing Manager of HSBC Amanah and Regional Marketing Manager of HSBC, I was there for four and a half years. I joined Access Bank UK at the beginning of 2015 as the head of their office here in Dubai. The Access Bank UK specialises in trade finance and private banking solutions for people who are interested in establishing a footprint in West Africa, mainly Nigeria. It is a UK bank that is fully owned by Access Bank Nigeria which is one of the top five banks in the country. We are experts at investing in Africa and Nigeria. My day-to-day job in the beginning was to establish the office, work on the launch plan. We already have interested customers that are being serviced out of the UK, but now that we have opened the office here in the UAE, it is easier and closer to our customers. Actually a lot of our customers used to be in Geneva, but are now here in the UAE, so it seem like the right place. Customer service is very important in the private banking segment, but it is a very big weakness in a lot of different service providers and until a service provider is able to get that and master it, it is a big, big opportunity. The customer wants to be looked after, they want someone to understand their needs. They don’t want to talk to an automated machine or explain themselves over and over again to different customer service agents. Banks must be less dependent on technology and more reliant on human resources. If you invest in human resources you will get better results. Technology is great and is there to help us do our work better, but not there to replace human talent. I am very passionate about my job. I cannot do my job unless I believe in it and when I believe in a brand and a product I do my job really well. Once that passion fades away or there is something I do not believe in, I cannot do my job properly. I am passionate about the little things that change in your day to day.

The 7 Habits of Highly Effective People, is one of my favourite books and one of the books I think should be taught in schools. It gives you practical experience that you don’t get in schools.

If you invest in human resources you will get better results. 72

www.bankerme.com

Rola Seifeddine Head of Representative Office in UAE, Access Bank UK; Global Marketing Manager of HSBC Amanah and Regional Marketing Manager of HSBC

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LAST WORD

Wayne Andrews

Managing Director, Treasury Tutor

Talks financial training and the UAE economy What is Treasury Tutor and what does it do? sultancy company A financial markets training and con banks, government ral working with banks, brokers, cent trade associations. and rters expo rs, departments, importe

What do you offer? Training across the entire range of financial markets disciplines, including foreign exchange, cash money markets, debt capital markets, etc, with particular emphasis on the mathematical implications of using these products and services. Advisory services aimed at helping corporates, especially importers and exporters, proactively manage the risks associated with adverse volatility in exchange rates, interest rates, commodity prices, etc.

What does your day-to-day job entail? All of the above, plus frequently speaking at conferences and seminars encouraging firms to pay more attention to these very manageable risks.

What do you think is the biggest weakness of the finance training industry in the UAE? There are very few companies doing this, so it is difficult to identify a particular weakness, but all trainers should be encouraging market users to acquire a greater understanding of the products and services they use.

What has been your greatest business success? principal consultant On three occasions, I have been the projects, including on successful front-to-back treasury and procedures, cies poli , ems installation of new syst ent measures. agem man risk and rting repo , controls

What do you think the opening up of Iran will mean for the UAE? The possibilities are endless. Iran will first want to modernise and upgrade their economy in a number of key areas, including banking, finance, transport, health and infrastructure, all of which represent huge opportunities for UAE firms.

What is your favourite book? I could not name only one. If I am reading about this region, I enjoy The Arabs: A History by an Oxford University professor called Eugene Rogan, who is probably the finest Western writer on the Middle East and its history. There are two sporting books about leadership I really enjoyed— both of which have inspired me in my professional business life: The Art of Captaincy by Mike Brearley, a former England cricket captain, and Winning! by former England rugby coach Clive Woodward. Both are better than any ‘management’ book I have ever read.

What are your hobbies? Not much time for hobbies these days, but I spend whatever spare time I have on anything rugby-related. In particular, I run the drug-testing programme at the Dubai Sevens on behalf of World Rugby, the governing body for international rugby worldwide. Also, despite my advancing years, I enjoy keeping up-to-date on all the amazing music that is around these days.

Who would you most like to have dinner with? My father. He died when I was only 21 (he was only 51), so he has missed the whole of my career. We have a lot of catching up to do.

How do you think the UAE economy is faring in the face of unstable oil prices? prices has added to the pressure on the Government’s The UAE represents a pinnacle of stability in the region, but the slump in oil the OPEC producers, perhaps led first by Saudi Arabia, that assumed be must it low, also is revenues and budgets. As demand for oil demand in the market. This will help the price to ed will soon cut production to levels which reflect more precisely the depress oil returns to a level above $100 per barrel. which in future near the in scenario a recover, but it is difficult to envisage

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11/02/2016 10:17

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