Browse
related articles
With the presentation of that license, the DIFC ceased to be a development project and became an operational entity that has been designed to foster a new financial services cluster in the Middle East.
Dubai officials now hope that the DIFC will catapult the city into the major league - alongside London, New York, Singapore and Tokyo - and they believe they have the right combination of timing, zero tax, regulations and proximity to Gulf wealth to make their dream a reality.
The question is, will the top tier of global financial institutions buy into the dream? The next wave. According to David King, acting CEO of the DIFC's regulatory authority, the DFSA, over 50 financial institutions have already expressed interest.
Standard Chartered and a Gulf energy fund joined Julius Baer in the first wave of licensees, and a further 20 licenses are expected to be issued by the end of the year. Others that have announced interest but are yet to be licensed include Credit Suisse, Merrill Lynch and Deutsche Bank.
The reasons why the DIFC appeals to these institutions vary, but universally include the benefits of local access to the estimated $1.8 trillion of Arab wealth. While some 45 percent of Middle Eastern assets are currently held overseas, Arabs are now looking for investment opportunities closer to home.
Banks and asset management firms that can provide high-quality local service therefore stand a good chance of winning the business of rich individuals, while the development of the region's capital markets will also throw up opportunities for investment bankers at a time when other global markets, with the notable exception of China, are stagnating.
Julius Baer has hired eight staff for its DIFC business, and will use Dubai as its hub for the Middle East and South Asia. Although the bank will only act in an offshore capacity for now - giving advice locally but passing transactions requests on to Switzerland - it will consider booking business in Dubai once it sees how much demand for its private banking, institutional asset management and capital markets services it can generate.
"What the DIFC is doing is really quite exceptional," says Michael Baer. "They have set up a financial center in a region where until now it was not possible to offer a full range of services."
Brij Singh, regional head of Julius Baer for the Middle East and Indian subcontinent, explains that high net worth individuals expect their private bank to provide a local service, and that setting up in Dubai is therefore an integral part of Julius Baer's value proposition.
Standard Chartered, on the other hand, has 10 branches in the UAE that offer a wide range of retail, corporate and investment services licensed by the UAE central bank.
According to Ray Ferguson, Standard Chartered's CEO for the UAE, his bank has sought a DIFC wholesale license so that it can be more "creative and futuristic" in the structuring it can do. "If the DIFC can attract even a small percentage of Arab liquidity, that will create major opportunities for a bank like us."
It is the creativity of the DIFC's regulatory infrastructure that lies at the heart of the center's sales pitch.
Arabies Trends
