The recent announcement that HSBC Bank Middle East Ltd. moved its incorporation from Jersey to Dubai, under the auspices of the Dubai International Financial Center, sent a powerful message that the regulatory climate and safety of the Emirate is strong enough to take such a drastic decision. The assets of HSBC Middle East amount to 40 billion dollars, making it one of the largest asset transfers to Dubai. It is a strategic move for HSBC as it provides the bank with an address that is more legitimate and suitable to its Middle East business activities.
Another example is the opening of an insurance platform for regional underwriters in Dubai in 2015, by the London based insurance syndicate Lloyd’s. It indicates the dynamics of the region and specifically Dubai International Financial Center (DIFC) as a gateway for finance in the Middle East. . The focus on regulatory certainty and economic stability show how Dubai aims to become one of the global financial centers that will shape the world of finance in this century.
While news from the Middle East is dominated by humanitarian crises, conflicts and economic downturns, it is hard to believe that the growth of the United Arab Emirates continues to be sustained. The key explanation for this is that, in contrast to other parts of the region, Dubai is a beacon of stability and regulatory certainty. Dubai International Financial Center is, for example, unique in operating under English common law and its regulatory standards. The Dubai International Financial Center’s profile and sophistication as a regulator has increased in credibility and scope. With over 1,400 companies from 72 countries, it has a global footprint that will support the aspirations of the Emirate.
In May 2015, a new commercial companies law has been introduced that aims to continue the UAE’s development of its market and business environment in line with global standards and, in particular, raise levels of good corporate governance, protection of shareholders and promotion of corporate social responsibility.
Besides Dubai International Financial Center, another determining factor in the region is the Central Bank of the United Arab Emirates. It is a respected federal central bank, responsible for monetary policy and the single currency of the Emirates. Like the European Central bank, however, it also has to deal with seven different fiscal policies. Its role in the consolidation of the Emirates banking sector and its regulation is becoming critical to the region. New rules have been issued by the Central bank to deal with risk management at international standards
There is no doubt, the move from Jersey deals a blow to these ‘Iles Anglo-Normandes’ or Channel Islands off the coast of France that are effectively part of the United Kingdom. They have been an offshore “tax haven” under many definitions. Given the negative connotations following the Panama Papers and Dubai’s maturing regulatory framework, the move of HSBC to Dubai aligns with Chairman Douglas Flint’s call on banks to keep tightening up their checks and controls: The so-called Panama Papers have highlighted once again how perfectly legal corporate structures can be abused to facilitate money laundering and tax evasion or to obscure ill-gotten gains.
Behind all this, a possible merger of the securities regulators has been in the cards for years to improve the depth and transparency of the capital markets.
The dynamics in the Middle East are significant: the potential of such moves and the developments in Dubai represent a much-needed positive sign from this region and one that benefits international finance.
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