HSBC and three other banks are set to join a scheme aimed at clearing debts owed by UAE nationals through a combination of write-offs and a Dh10 billion (US$2.72bn)government fund.
Their participation comes as the number of Emiratis who have already had their debts settled under the scheme reaches 439, a source at the Central Bank said yesterday.
HSBC will this month become the second international bank after Standard Chartered Bank to sign up to the initiative launched by Sheikh Khalifa, President of the UAE, on National Day last year.
Sharjah Islamic Bank, Noor Islamic Bank and Arab Bank for Investment and Foreign Trade are the other new banks, the source said. They join 13 banks already signed up.
"For some time, Noor Islamic Bank has been in discussion with the Central Bank on how best to alleviate the financial problems faced by indebted UAE nationals," said a spokesman for the bank.
"Although this is not a significant issue for Noor, we support the Central Bank initiative.
"[The programme] is aimed at not only lessening the debt burden of UAE nationals but also heightening awareness about the risks of unchecked borrowing and the benefits of saving for the future."
As part of the initiative, banks agree to write off 50 per cent of the debt owed by Emiratis who qualify under the scheme.
The remaining 50 per cent is then paid back to banks from the Nationals' Defaulted Debts Settlement Fund, overseen by a technical committee made up of representatives of the Central Bank and other government agencies.
To date, 1,300 applications to the initiative have been received. A total of 345 Emiratis have already had their debts settled, with a further 94 in the pipeline.
Emiratis were able to rack up sizeable debts during the global financial crisis as many banks have traditionally been more willing to lend to them, viewing them as less of a non-repayment risk than expatriates.
Existing banks operating under the scheme have reported strong demand from indebted national customers.
"There's definitely a level of interest still," said a staff member at a UAE bank, who asked to remain anonymous.
"We are continuing to get quite a lot of calls from people wanting to register."
Beneficiaries of the fund pay up to 25 per cent of their monthly salary in interest-free, long-term instalments until the clearance sum is repaid to the fund.
In the meantime they will not be able to take out another loan.
Unemployed applicants are required to look for a job and are given six months to find one or face unspecified penalties.
The committee comprises representatives from the Ruler's Court, Abu Dhabi Department of Finance, the Central Bank and the Justice Department in Abu Dhabi and works in coordination with banks and other creditors to negotiate clearance sums for personal debt.
A study by the committee last year compiled a list of 6,830 Emiratis who owed debts of less than Dh1 million.
Of those, 1,300 nationals made applications to seek assistance under the fund.
Some of those included people serving jail sentences for their debts or awaiting legal action.
National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Abu Dhabi Commercial Bank, Union National Bank, National Bank of Ras Al Khaimah, Standard Chartered Bank and Mashreq Bank were among the first banks to sign up to the scheme.
No one was available to comment yesterday from HSBC, Noor Islamic Bank, Sharjah Islamic Bank or the Arab Bank for Investment and Foreign Trade.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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What is the Supreme Petroleum Council?
The Abu Dhabi Supreme Petroleum Council was established in 1988 and is the highest governing body in Abu Dhabi’s oil and gas industry. The council formulates, oversees and executes the emirate’s petroleum-related policies. It also approves the allocation of capital spending across state-owned Adnoc’s upstream, downstream and midstream operations and functions as the company’s board of directors. The SPC’s mandate is also required for auctioning oil and gas concessions in Abu Dhabi and for awarding blocks to international oil companies. The council is chaired by Sheikh Khalifa, the President and Ruler of Abu Dhabi while Sheikh Mohamed bin Zayed, Abu Dhabi’s Crown Prince and Deputy Supreme Commander of the Armed Forces, is the vice chairman.
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Fire and Fury
By Michael Wolff,
Henry Holt
