The strategy of the Abu Dhabi Global Market (ADGM) is being refined and perfected week by week, but it had its clearest public expression yet at a financial conference last week in London. What emerged is an increasingly focused and self-confident project as it prepares to formally declare itself open this year.
The London event was the first time the ADGM chairman Ahmed Al Sayegh has publicly made its case to the wider financial world, and to the financial media. There have, of course, been plenty of meetings with global financial institutions in Abu Dhabi, but the London event was the first time ADGM had taken a public platform to explain its message.
It was also the first public outing for Richard Teng, the head of ADGM’s important regulatory unit, since he joined from the Singapore regulator. The theme was how regulators can cooperate in the increasingly complex global battle against financial malpractice, but it turned into an explanation of how ADGM views its fundamental mission in creating a financial services hub. As some described it, it was an “expression of world ambition”.
The first thing that should be noted is that ADGM will look very firmly East, rather than West, for its inspiration. This has been apparent for some time, and was reinforced by Mr Teng’s appointment, but Mr Al Sayegh went further than he has before in explaining the rationale for this new direction, and what it will mean for ADGM.
Headlines that accompanied coverage of the London event screamed that the Swiss banking model was “dead”, but this wasn’t quite what Mr Al Sayegh said, nor indeed did it accurately reflect the extent of Abu Dhabi’s very good relations with the Swiss financial sector.
What he did say, very specifically, was that the old-style model of banking for which Switzerland has become notorious – anonymous numbered accounts, shrouded in multi-layered secrecy, protecting clients often of dubious rectitude – was dead.
In the face of opposition from politicians and regulators around the world, but especially in Europe and the US, those days were over. The global private wealth and asset management industry would have to develop new models to replace the old and discredited Swiss system.
It is doubtful they will look westward for inspiration. American and European financial systems are perceived as too bureaucratic in their regulatory apparatus, and in any case they failed the ultimate test during the financial crisis.
The scandals that have recently overcome HSBC and Petrobras, for example, originated in secrecy-shrouded Switzerland. Zurich and Geneva have also been fingered as the source of advice to American and other would-be tax dodgers.
So the new players on the world financial stage, especially in private banking and wealth management, are in east Asia – in Singapore and Hong Kong.
Both centres have developed regulatory systems that allow financial business to be conducted efficiently, but with enough transparency to satisfy the world’s banking authorities, such as the Committee on Banking Supervision, the IMF and the G20 group of industrial nations.
In Singapore, the system has been especially effective. The island state has risen to challenge Hong Kong as the leading Asian financial hub, pressing for the top slot worldwide by 2020, but has retained its reputation for dealing ruthlessly with public corruption.
The trick is to understand the difference between secrecy and privacy, and the fine line between transparency and burdensome disclosure. The London conference seemed to show that ADGM has grasped that.
Once the correct environment has been structured, Abu Dhabi’s natural advantages will give it a further boost in the wealth management business. As Hector Sants, an ADGM adviser, said, people like to have their wealth managed where they personally are, and there are a lot of wealthy people and institutions in the Gulf.
Incidentally, initial reports that institutions such as the Abu Dhabi Investment Authority (Adia) and Mubadala were about to move to ADGM’s home on Al Maryah island seem completely wide of the mark. Mubadala already has its petroleum business there, and is happy with it, but there are no plans to move the rest of the operation. Adia is completely satisfied with its gleaming tower on the Abu Dhabi Corniche.
fkane@thenational.ae
