DIFC sees 80 per cent growth

(OSAMA ABUGHANIM)   


 

The number of licensed firms at the Dubai International Financial Centre (DIFC) rose by more than 80 per cent in 2007, with growth expected to be robust this year despite turmoil in global financial markets, the centre’s regulator said.

 

However, the possibility of a recession in the United States and beyond could dampen the DIFC’s outlook for the next 12 months, the Dubai Financial Services Authority (DFSA) said in its annual report released yesterday.

 

The number of DIFC entities licensed by it grew from 116 to 211 last year. More than 160 of those firms are also authorised to carry out core financial services, it added.

 

“The DFSA has achieved all of its business plan objectives for the year and further consolidated its reputation as a world-class regulator of financial services,” DFSA Chairman Abdullah M Saleh said.

 

“Despite a degree of turmoil in international financial markets during the second half of the year, the DIFC experienced strong growth, which appears sustainable during 2008, unless world economic conditions dramatically deteriorate. For the DFSA, this means more firms and activities to supervise, a prospect which we welcome and for which we are well prepared.”

 

The Dubai Financial Services Authority is the independent integrated regulator of all financial and ancillary services conducted through the Dubai International Financial Centre.

 

“The rate of the DIFC’s growth over the past 12 months has surpassed the centre’s own expectations and has stretched supply capacity for office space and for experienced financial services staff,” said David W Knott, the DFSA’s Chief Executive Officer.

 

The recent sub-prime crisis in the US and the subsequent credit crunch has raised fears of a prolonged economic downturn in America that could spread to emerging markets.

 

While economists say that the UAE’s stellar growth is unlikely to be directly affected by a US recession, the knock on effect in Asia could have an impact on the Gulf economy.

 And uncertainty in other financial centre’s around the world could affect the DIFC’s performance as it continues to expand its global profile.

 

“During 2007, we signed a further 16 bilateral Memoranda of Understanding with regulators in the region and beyond. These include banking regulators of strategic importance to the DIFC, including China, Malaysia, Turkey, Jordan and the four Federal banking regulators in the US,” said Knott, adding that the regulator’s bilateral relationships now number 28.


Tough new regulations

Dubai International Financial Centre (DIFC) plans to introduce tough new regulations to create the most “ mature and sophisticated” legal framework to promote modern financial transactions, officials said.

 

The new Exempt Companies Regulations, which were put out for public consultation yesterday, are designed to assist financial institutions to carry out, among other things, securitisation transactions using the existing DIFC legal and regulatory framework.

 

Omar bin Sulaiman, Governor of the DIFC, said: “With the increasing number and growing sophistication of transactions taking place in the DIFC, it has again proved its commitment to international best practices – this time in the area of securitisation and other structured finance transactions.

 

“The simplicity of these new regulations also demonstrates the robustness of the existing legislative system, where it is now possible to introduce new areas of activity with relatively minor changes to our existing framework,” he said.

 

Both Islamic finance and conventional finance transactions in the region often require the use of special purpose vehicles (SPVs).

 

These SPVs, otherwise known as transaction-specific companies, are usually incorporated with the intention of being restricted in their operations, with no employees other than special directors.

 

The use of SPVs in the DIFC under the new regulations is intended to facilitate sophisticated financing activity.

 

Nasser Al Shaali, CEO of the DIFC Authority, said: “As the DIFC continues its emergence as a leading international financial centre, we are committed to providing the most mature, sophisticated infrastructure and advanced legal framework to promote the development of a highly prosperous financial industry. By proposing the new regulations we aim to encourage securitisation transactions at the centre and cater to and encourage the expansion of the products and services available at the financial centre.”

 

  

Policies And Actions In 2007

 

The Dubai Financial Services Authority (DFSA) has launched Codes of Practice.

 

  - The DFSA issued a major policy paper setting out proposals to
    develop its regulatory regime in light of international
    developments and the increasing maturity of the DIFC

 

  - The DFSA implemented EPRS, a web-based data collection and
    dissemination framework, to analyse prudential firm activity and
    risk levels

 

  - The DFSA obtained final injunctions against the operators of
    Enduam Asset Management for false representation

 

  - The DFSA shut down and obtained injunctions against the
    fictitious Dubai Options Exchange and United Arab Emirates
    Commodities Futures Board

 

  - The DFSA shut down and obtained injunctions against operators
    of Euro America Index

 

  - The DFSA accepted the withdrawal of licences of the Forsyth
    Companies after its failure to meet applicable regulatory capital 
    requirements

 

  - The DFSA banned two private bankers from participating in the 
    DIFC for false representation

 

  - The DFSA accepted Enforceable Undertakings from several 
    individuals for market related misconduct

 

  - The DFSA issued Enforcement Alerts to inform investors about 
    possible scams


 
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