Farah Foustok and Arwa Hamdieh have launched an organisation to promote the interests of the financial services industry in the UAE. Here, they give their views on how the sector will develop in the Emirates.
You recently set up the UAE Financial Services Association. What is the purpose of the organisation?
Ms Foustok:The Financial Services Association UAE [FSA] is a non-profit trade association for the financial services sector in the Emirates. Its objective is to act as the voice of the industry to the regulators and government entities; to advocate important issues relevant to growth and sustainability. Its ambition is to participate in developing an efficient, sustainable and profitable financial services industry that complies with standards of international best practice.
How does your role differ from that of the Emirates Banks Association?
Ms Hamdieh: Our role is a complementary one to the Emirates Banks Association's [EBA] role. EBA's mandate covers retail and commercial banks and the FSA serves the remaining areas within the financial services industry like asset management companies, securities and brokerage companies, investment banks, private banks and life investment companies. It is worth noting that in other markets it is quite common to see more than one type of association servicing the financial sector. Usually there are banking associations and other specialised groups. However, our market is still small and less developed in comparison with other countries. The financial services sector in the UAE has a little over 470 firms, out of which retail and commercial banks account for only about 50. The remaining number of firms does not sustain more than one specialised association, hence we decided to provide an umbrella association for all the other types of firms that are currently unrepresented. We do expect to see certain divisions of a few banks, which undertake non-retail or commercial activities such as asset management or brokerage and securities services, to become members of both associations in order for them to equally support those specialised divisions, promote best practice and improve the business environment.
What will your relationship be with the UAE regulators?
Ms Foustok: The FSA will be a consultative body speaking on behalf of the financial services industry. The regulator's mandate is to set the rules that govern the sector. Our mandate is to provide feedback on those rules, whether they have achieved the fine balance between protecting the investors and stimulating growth and prosperity within the industry while maintaining best practices.
What ambitions do you have as regards membership? How many members will you have by the end of the year?
Ms Hamdieh: We currently have 22 members, which includes a diverse group of local and international firms from across the UAE. We are aiming to sign up a total of 60 firms by the end of this year. Our goal is to grow the membership base by about the same amount each year until we achieve 70 per cent coverage of the target market by the end of year five.
What are the burning issues you hope to address?
Ms Foustok: The FSA already has two active working groups. One is a fund management working group, which is working on coordinating matters related to the highly anticipated new mutual fund regime the Securities and Commodity Authority has issued. The second is developing a voluntary code of conduct for the financial advisers and wealth managers, which we hope would be endorsed by the regulator. Another issue will be addressing the transition towards the twin-peak regulatory model, which we expect to result in a series of new regulations. We are aiming to collaborate with other associations on these policy issues to achieve a coherent response. The board is currently defining its strategy for the next 12 to 18 months and some of the issues we need to address include the development of the capital markets framework in the UAE and solutions to building effective saving and pension schemes here.
A number of high-profile scandals have hit the financial sector, banks especially, around the world recently, why is this?
Ms Foustok: The financial services industry on a global scale has been facing a number of … mainly legacy issues from the de-regulation era. That period of time provided the industry with innovation and introduced a number of highly successful products and services, which benefited institutions and consumers alike. However, the "backseat approach" - which some of the regulators have taken - combined with the relaxed due-diligence style adopted by some of the financial institutions - led to an undesired growth of the "greed is good culture". The principles of accountability, responsibility and integrity in many cases were not upheld. We believe that going back to basics is the wisest approach to heal the wounds of the industry. And re-instilling the culture of client centricity, best practice and good business ethics are the most cost effective ways to sustain growth in the industry in the long run.