The establishment of Abu Dhabi World Financial Market (ADWFM), a new financial free zone on Al-Maryah island, was announced two weeks ago, but its impact is already being felt in the international banking community.
With a regulatory authority and a court system mirroring that of Dubai International Financial Centre (DIFC), ADWFM may soon be competing for Dubai’s status as the region’s financial hub, a title it has carried for many years.
As global banks, faced with shrinking balance sheets because of stricter liquidity and capital requirements, remodel their businesses to focus on core operations, they are rethinking their strategies for the Middle East.
Wealth management and asset management tend to be attractive areas for international growth as they tend to be less volatile than others. Banks specialising in these areas are likely to expand where their wealthy clients are located, such as Qatar, Abu Dhabi and Saudi Arabia.
For the moment, Qatar Financial Centre is DIFC’s main competitor, attracting banks with seed capital and its vast resources. Qatar has one of the highest concentrations of millionaires in the world and has plans to spend $150bn on infrastructure in the next five years.
Other areas of banking are also set to grow in Qatar. The country is the regional leader when it comes to mergers and acquisitions (M&A), which opens up potential for corporate and investment banks by offering services such as trade finance and currency on the back of an M&A deal, which will multiply their earnings.
Dubai is still enjoying growth. Its reputation and developed infrastructure are still attracting large banks with healthy balance sheets. Its ambitions to become a hub for Islamic finance will allow the emirate to lure more business. However, growth in other Gulf financial centres will undoubtedly change the dynamics of the regional financial landscape in the years to come.