BANKING SYSTEM OF DUBAI

Central Bank
There are many aspects to the role the Central Bank plays in supporting the national economy of the United Arab Emirates. In addition to acting as the bank to the other banks operating in the country, it is also the banker and financial advisor to the Government.
It is the responsibility of the Central Bank to formulate and implement the country's Banking, Credit and Monetary Policy in order to realize and achieve the Economic Policy objectives, including price stability, and to support the U.A.E. Dirham, guaranteeing its value, stability and its free convertibility into all currencies.
The Central Bank formally commenced its functions on 11 December 1980 in pursuance of the provision of Union Law No. (10) of 1980, which superseded Union Law (2) of 1973, establishing the former Currency Board in the United Arab Emirates.
In defining the Central Bank's objectives, Article 5 of Union Law No. (10) of 1980 states that the Central Bank:
"Shall direct monetary, credit and banking policy and supervise over its implementation in accordance with the State's general policy and in such ways as to help support the national economy and stability of the currency."
For the attainment of these objectives, the said law empowers the Central Bank to:

- Exercise the privilege of currency issue;
- Endeavor to support the currency, maintain its stability internally and externally and ensure its free convertibility into foreign currencies;
- Direct credit policy in such ways as to help achieve balanced growth of the national economy;
- Organize and promote banking and supervise over the effectiveness of the banking system;
- Undertake the function of the bank of the government within the limits prescribed in the law;
- Advise the government on financial and monetary issues;
- Maintain the government's reserves of gold and foreign currencies.
- Act as the bank for banks operating in the country; and
- Act as the State's financial agent at the International Monetary Fund, the International Bank for Reconstruction and Development, and other International and Arab Funds and Institutions and carry out dealings of the State with such concerns.

Locally Incorporated and Foreign Banks
Banks in the U.A.E. are divided into two major categories: locally incorporated banks and these are public shareholding companies licensed in accordance with provisions of Union Law No. (10) of 1980, and branches of foreign banks which have obtained Central Bank's licenses to operate in the country as per provisions of the said Law. Historically, national banks (with majority national shareholding) and foreign banks existed prior to the establishment of the former Currency Board and, hence, before the Central Bank was created and commenced its operations. Within such historical circumstances the number of banks and their branches in the country and abroad increased very rapidly on obvious disproportion with the capacity of the local market, hence, provoking the monetary authority at that time to withhold issuance of licenses to any new bank and set about reducing the number of branches of a foreign bank to a maximum of eight branches.
The UAE Central Bank issued five new licenses to foreign banks and financial institutions in 2003, bringing to 48 the total number of representative offices of foreign banks in the UAE. The number of branches of the 21 national banks rose to 330 by the end of 2003 compared with 310 at the end of 2002. Two new money exchanging offices of national banks brought the total to 37 in 2003, while one new establishment brought the total number of branches and exchange houses of the 25 foreign banks to 87. Four financial and monetary brokers entered the market in 2003, pushing the total number of licensed brokers to 32 head offices and one branch. The number of finance companies remained unchanged at six by the end of 2003.

Restricted License Bank
A restricted License Bank is a commercial bank, which is not authorized to accept deposits from residents in Dirhams, but may receive deposits in foreign currencies. Such bank may also extend credit facilities to residents and non-residents.

Investment Banks
Union Law No. (10) of 1980 defined investment bank as bank that does not accept deposits whose maturities are less than two years, but may borrow from its head office, from local or foreign banks, or from financial markets.

The Hawala System
Hawala plays a key role in facilitating remittances, especially those of migrant workers and is an integral part of the international finance system. The UAE recently reaffirmed that its stance with regard to hawala would continue to be one of regulation and prevention of abuse, rather than a ban on the long established traditional system of financial transfers. It is working with the World Bank and IMF to achieve these objectives.
Hawala predates traditional or ‘Western’ banking in the Middle East and Asia. Prior to establishment of Asia’s first Western bank around 1770, sarafs and potedars, primarily moneychangers and essentially predecessors of present day hawaladars, played a vital role in nearly all commercial and financial transactions.
Today, both hawala and Western-style banking systems play vital and frequently intertwined roles in the economies of India, Pakistan and Bangladesh. The UAE’s large population of migrant workers from these countries has supported a significant growth in the hawala business in the Emirates.
The Central Bank has taken measures to bring the system under control, issuing licenses to hawala operators in the country so that these dealers can carry on their business within a legal framework. By regulating the hawala system, the Central Bank has placed the onus on hawala dealers to report any suspicious transactions to the authorities. It was the previous anonymity and scant documentation that made the hawala system vulnerable to abuse by individuals and groups transferring funds to finance illegal activities.

Financial Institutions Operating
Some of the national and foreign banks operating in UAE:

National Banks operating in UAE:

A bu Dhabi Islamic Bank
Abu Dhabi Commercial Bank
Arab Bank for Investment & Foreign Trade
Bank of Sharjah
Commercial Bank International
Commercial Bank of Dubai
Dubai Bank
Dubai Islamic Bank
Emirates Bank International
First Gulf Bank
Invest Bank
Mashreq Bank
Middle East Bank
National Bank of Abu Dhabi
National Bank of Dubai
National Bank of Fujairah
National Bank of Ras Al Khaimah
National Bank of Sharjah
National Bank of Umm Al Qaiwain
Union National Bank
United Arab Bank

Foreign Banks operating in UAE:

Al Ahli Bank of Kuwait K.S.C.
ABN-Amro Bank N.V.
Arab African International Bank
Arab Bank plc.
Bank of Baroda
Bank Melli Iran
Bank Saderat Iran
Banque Banorabe
Barclays Bank Plc.
Banque du Caire
Credit Agricole Indosuez
Credit Suisse
BLC (France) S.A.
BNP Paribas
HSBC Bank Middle East
Citibank N.A.
El-Nilein Bank
Habib Bank A.G.Zurich
Habib Bank Limited
Janata Bank
Lloyds TSB Bank Plc.
National Bank of Bahrain
National Bank of Oman S.A.O.G.
Rafidain Bank
Standard Chartered Bank
Societe Generale
United Bank Limited
UBS