Financial markets in the UAE in particular have provided a major focus of attention over the past year or more as banks and investors, anxious to participate in the Gulf oil boom, have piled in and added to the country’s diverse range of institutions, exchanges and markets. While oil prices eased in 2006, all states in the Gulf have produced record oil revenues and massive liquidity still exists in the region.
For Sultan Bin Nasser Al Suwaidi, governor of the UAE Central Bank since 1991, the key task has been to maintain and safeguard the institutions and the banking sector, and while markets have witnessed significant volatility, the governor’s efforts have helped not only to keep the financial infrastructure stable but also provided the confidence for significant financial developments.
According to the latest UAE Central Bank statistics issued for the second quarter of 2006, the volume of deposits at the 46 banks operating in the UAE rose by 7% during the first half of 2006 to Dh438.3bn ($119.4bn).
The massive growth of the domestic liquidity coupled with the increasing demand for finance motivated banks to increase their loans for the different sectors (residents and non-residents) by 15% during the first half of this year.
While UAE exchanges have witnessed falling prices for most of 2006 with the Dubai Financial Markets (DFM) index falling by more than 53% in the first five months of 2006, the governor was at the forefront in late 2005 of warning about a sharp market correction and in tightening regulation. Also, in recent years the governor has been a pioneer in establishing the legal and regulatory framework to combat financial crimes.
His efforts to implement anti-money laundering (AML) legislation, and in combating terrorist financing as well as emphasising internal procedures within financial institutions, has helped strengthen the reputation and credibility of the sector.
This is particularly important, as although many international firms, such as Goldman Sachs and Barclays, have joined the separately regulated Dubai International Financial Centre (DIFC), Mr Al Suwaidi’s role in providing the underpinning for the country’s entire financial sector has been critical.
Regionally, the governor has taken a proactive role in the proposed move to establish Gulf monetary union in 2010 and has also been keen to look at alternatives to the dollar for the country’s $25bn in reserves. In a year of volatility, the steady hand of the governor has provided both a calming and creative role in the UAE’s financial development.
