Challenges stack up for the banks
Banks in the UAE have been tardy about consolidation and rationalization, relying on the benefits of continuing high oil prices. Now, though, they face the challenges of money-laundering investigators and impending WTO financial sector liberalization.
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On the surface, prospects for the United Arab Emirates' financial sector look good. The banks are delivering healthy profits and are well capitalized, the local economy continues to thrive on the back of higher oil prices and the financial system has recovered from the shock of seeing an expatriate Indian businessman flee Sharjah last year with outstanding debts of more than $245 million.
However the next two years are likely to prove extremely challenging. The UAE has to deal with allegations made by some international regulators and bankers that it has become a centre for money laundering.
There are also too many banks in the UAE and they have to come to terms with the prospect of more intense competition from aggressive international banks once the World Trade Organization's liberalization of financial markets is introduced in 2003.