The Dubai International Financial Centre (DIFC) has become the first choice by default for overseas banks looking to do business in the UAE as the Central Bank rarely hands out licences for them to operate outside the special financial zone, bankers say. Executives of ABN Amro, the recently nationalised Dutch financial institution, said they moved into the DIFC recently when they lost their licence to operate elsewhere in the UAE following an ownership change.
ABN Amro tried to obtain a licence to operate outside the DIFC but made no headway with the Central Bank. "It is very vague as to what you can do and what not. But it would have been a very difficult story, a very difficult process and very time-consuming," said Hassan el Nahas, ABN Amro's head of private banking in the Middle East. ABN Amro first approached the Central Bank for a licence about a year ago. At the time, "the Central Bank refused to give us any assurances" as to whether we could expect a licence or not, Mr el Nahas added.
It is not known when the Central Bank gave out the last full commercial banking licence to a foreign bank, but in December 2008, Deutsche Bank and Bank of Tokyo-Mitsubishi UFJ received permission to conduct wholesale banking through a branch in the UAE. The Central Bank was not available for comment. Last week, Pakistan's Muslim Commercial Bank said it was looking to move into the DIFC because it did not expect to obtain a banking licence.
Setting up an office in the DIFC is far more expensive than the alternatives. In addition, the DIFC's Category I licence neither allows the bank to collect deposits from UAE residents nor funds denominated in dirhams. ABN Amro, which has been in the UAE since 1973 and until recently had a full commercial banking licence with four retail branches, said it chose the DIFC despite its high costs. email@example.com