Private exchanges and wealth management activities witnessed a substantial growth this past year, as exemplified by the recent expansion of a number of Swiss banking operations in the UAE. This has been due to the country being viewed as a viable alternative to Europe, with a total of 18 Swiss banks currently operating in the Emirates. Added wealth witnessed by the region has drawn these banks towards capitalizing on this prosperity, while striving to alleviate the effects of the European crisis on the banking sector, which is considered the key player in the Swiss economy. Swiss banks are the driving force behind generating 9% of the country’s total GDP and are currently responsible for managing around a third of private wealth assets worldwide. A total number of 18 Swiss banks currently operate in Dubai, with 10 of these simultaneously maintaining branches in Abu Dhabi.
Mr. Tarek Hamdan, Chief Marketing Officer at SAGE – a provider of Financial Investment Solutions, stated that the European crisis coupled with the new regulations adopted by private Swiss banks, which have recently transferred or expanded their operations in Dubai, have transformed the emirate into a quasi regional center for active Swiss and European banks. He added that both the encouraging business environment in the UAE, together with the state’s concrete links with international markets, especially emerging ones, have played a significant role in enticing these banks into instigating such expansion.
Trend of Wealth Owners
As reported by Al Bayan, Hamdan added, “Proprietors no longer have the desire to initiate accounts in Europe or the US in light of the current challenges afflicting the European economy, and the reduction in the credit ratings of various banks. I think investors today are turning towards the Gulf region, where numerous banks render the same services as their European counterparts.” He added, “During a visit to Europe recently, one could clearly witness the impact of the European crisis on a spectrum of business sectors. This comes at a time when business carries on as usual in Dubai, hence driving many European banks to transfer a significant portion of their investment activities, even senior personnel, to the region and specifically, Dubai.
Hamdan went on to assert that the new regulations imposed by the Supervisory Authority on banks in Switzerland have resulted in lowering interest rates on deposits and has reduced the appetite of investors for risk-taking. This has also forced a number of renowned global banks to forfeit their aspirations and seek alternative revenue-generating markets.
He added, “SAGE launched its Dubai operations in 2008, coinciding with the start of the crisis, which constituted a profound challenge at the time. However, we successfully managed to render unwavering support to our clientele throughout the crisis, and even recruited a large number of employees in the process. I believe banks in the GCC have demonstrated that their stability surpasses that of their European counterparts, and I think today we have overcome the crisis. I also see no reason hampering the creation of new wealth management accounts in the region.
Statistics indicate that Swiss banks possess the lion’s share when it comes to global wealth management, commanding 27% of the total market share, or an equivalent of 2.1 billion US Dollars, according to the World Wealth Report of 2011.
Risk and Wealth Management
Hamdan went on to encourage banks to carry out a comprehensive assessment of client investment risks prior to assuming any wealth management responsibilities. He added that today, advanced solutions are available to effectively manage various client investments, whether they be bonds, securities or shares, while computing pre- investment risks simultaneously. According to Hamdan, cutting-edge solutions can directly compute risks, such as determining the maximum share investment risk that can be absorbed by the client, as specified by the survey. Should the client attempt to surpass that limit online, the system will then alert him accordingly.
Hamdan emphasized that investment risk computation has gained special significance following the global crisis, especially in light of supervisory regulations laid out by central banks insofar as lending is concerned. He went on to highlight the need for improving automated procedures in regional banks, while benefitting from advanced technical mechanisms aimed at yielding more accurate investment risk assessments.
by Wael Al-Lababeedy of Al Bayan