Dubai unveils International Financial Center



Dubai, UAE: His Highness General Sheikh Mohammed Bin Rashid Al Maktoum, Crown Prince of Dubai and Minister of Defense of United Arab Emirates, announced today the creation of Dubai International Financial Centre (DIFC). This major new initiative will establish Dubai and the UAE as a crucial node in global finance and a regional center of financial services.

Dubai International Financial Center is a global location of choice for financial institutions and brings world-class regulatory processes and market mechanisms to the region comprised of the GCC, the Indian subcontinent, Northern Gulf, Central Asia, the Levant, North and East Africa. Sheikh Mohammed emphasized that DIFC will be THE Bridge between the financial markets of the East and those of the West serving as a gateway for the flow of capital to and from the region, thus strengthening the regional links to international capital markets and filling a void in the global financial services infrastructure.

By applying its fundamental principles of Integrity, Transparency and Simplicity, DIFC offers a truly unique business environment that will enable world-class financial institutions, professional service firms and corporations to operate regionally and globally out of Dubai with significant competitive advantages. DIFC will position Dubai on the global financial map as a recognized node for institutional finance, His Highness declared. DIFC will also contribute to raising the operating standards of regional financial institutions.

His Highness noted that the continued trend and impact of globalization and the rapid and dynamic change to the international business environment was evident and required no elaboration. Economies are becoming more interdependent and integrated, and standards of legislation governing business and commerce are becoming more uniform, the Crown Prince added.

Putting the creation of the DIFC in the context of Dubai and the UAE economic strategy, Sheikh Mohammed remarked, We have always strived to identify future trends and to be at the forefront of developments. He went on to say -Should we be observers or by-standers of these developments? Dithering has never been our option, neither in the past, nor today. Noting how Dubai and the UAE have been continually adjusting to the pace of change in the international economic and business landscape, His Highness pointed out that since decades ago, the Emirates had a broad lane for international trade flows. Today, he remarked, the two most prominent pillars of this lane are Information Technology and global financial flows.

Mr. Anis Al Jallaf, the Chairman of DIFC Board, gave an in-depth description of the initiative and highlighted that DIFC is about bringing world-class global finance players to serve the region, not about relocating banks and operations already established in the UAE. He went on to emphasize that DIFC is a place for Institutional Finance, not retail banking.

Mr. Jallaf went on to describe the five primary areas of focus of DIFC:

a. Asset management: There is more than a trillion dollar of wealth from the region sitting in banks somewhere in the world. Many retail banks need specialist asset managers, usually based in London or New York, for managing their money. Corporations also require asset manager services for their pension funds and reserves. Dubai aims at creating the right environment where the most professional institutional asset managers will choose to set up a base and their services to those regional corporations and banks that are in need of convenient, professional and competitive asset management services closer to home.

b. Islamic Finance: There is a multi billion dollar market for Islamic finance products and services, yet the industry is still very much under developed. The regional industry is fragmented and suffers from a lack of adequate products to satisfy the rapidly increasing demand and sophistication of the investors. Dubai aims to become a center for product innovation and development for Islamic investors, where more infrastructure development projects and regional financing needs are funded through Islamic finance instruments.

c. Regional Financial Exchange: There are hundreds of successful companies scattered in the region that need capital however local capital markets are not developed enough to fully satisfy needs. DIFC will bring to the region, in partnership with a well known leading exchange player of the world, an accessible and truly world-class financial exchange that will serve as a gateway for capital and for investment. The regional exchange represents a one-stop-shop for the significant securities trading in the Region with a centralized trading system capable of being accessed globally providing ease of access for international investors, wherever they are located. Issuers in the Region will benefit from improved visibility for their companies and greater access to finance from investment houses globally.

d. (Re) Insurance: The insurance industry in the region has a lot of room for development and the creation of a center for re-insurance in DIFC will go a long way in accelerating the growth and the development of the insurance industry and enhance the range of products and services offered in the region. Insurance companies can extend their scale and distribution capability by setting up their regional insurance, commercial reinsurance, captives and captive management, and credit insurance operations in a single administrative base at DIFC and developing a stronger position in the region.

e. Backoffice operations: Financial services back-office operations and outsourcing have been a continued trend in developed nations. With its world-class IT infrastructure and access to the huge regional pool of human resources, Dubai is ideally positioned to become a location of choice for global backoffice operations of banks. In partnership with the Dubai Internet City, DIFC offers a very competitive and attractive value proposition to both large and small banks that would increase their effectiveness while reducing their costs.

The Chairman of the DIFC Board of Directors emphasized that the DIFC Regulatory regime will be in strict compliance with international standards and recommendations. He stressed the important role of the regulatory body and how it would promote a clean, transparent, and orderly regional market. The DIFC Regulatory regime will be in strict compliance with international standards and recommendations set by organizations such as BIS, OECD (FATF) and the IASB.

Financial institutions operating in the DIFC are required to have a distinctive track record of professional conduct and be headquartered in a country that is member of the Financial Action Task Force on Money Laundering (FATF) or from a country that is in compliance with the recommendations of FATF. Institutions that have publicly subscribed to the more rigorous guidelines of Wolfsberg Principles on anti-money laundering will also qualify for operating in DIFC. The objectives of the DIFC Regulatory Agency are:

· To promote clean, transparent and orderly markets - The Regulatory Agency will promote fairness, transparency and orderly conduct in financial markets through the setting and enforcement of appropriate standards in order to ensure the appropriate level of protection of market participants whilst acknowledging their responsibility for their own decisions.

· To reduce systemic risk - The Regulatory Agency will adopt, promote, monitor and enforce internationally accepted standards of financial soundness, and aim to ensure that the failure of any one institution does not undermine the overall stability of the DIFC financial system.

· To promote UAE and the DIFC - The Regulatory Agency will work with the UAE authorities, the DIFC Development Company, and other entities to build the reputation of DIFC and promote it as a premier location for international financial services businesses.

· To facilitate high operating standards of local and regional institutions - The Regulatory Agency will seek to promote recognition of, and compliance with, internationally accepted operating standards amongst local and regional financial institutions.

Mr. Al Jallaf presented the members of the DIFC Board of Directors: HE Dr. Mohhammed Khirbash, HE Mohamed Alabbar, Mr. Abdul Aziz Al Ghurair, Mr. Ahmed Bin Brek, Mr. Abdul Jalil Yousuf Darwish, Mr. Essa Kazim, Mr. Farid Lutfi, and Mr. Majid Radpay. He also presented the names of the DIFC Advisory Committe: Dr. Kenneth Courtis, Vice Chairman of Goldman Sachs Asia, Francis Finlay, Chairman and CEO of Clay Finlay Inc., Stephen K. Green, Chairman of HSBC Investment Bank Holdings plc, Thierry Lombard, Managing Partner of Lombard Odier et Cie, Michael Philipp, Global Head of Asset Management of Deutsche Bank, James. J. Schiro, COO of Group Finance of Zurich Financial Services, Jean Claude Votron, Executive VP Citibank, and Makoto Utsumi, President & Executive Director, Japan Center for International Finance, were also introduced.

He went on to introduce the Acting Chief Commissioner of DIFC, Mr. Ian Hay Davison who is leading the setup of the DIFC Regulatory Agency. Mr. Davison has a distinctive track record in the global financial industry, with many years of regulatory experience in the UK and in Hong Kong. He was formally CEO of Lloyds of London. After having successfully established Dubai Internet City, Dubai Media City, and having launched Tejari and other technology enabled initiatives such as E-Government, the launch of DIFC was the logical next step and an indispensable second pillar for making Dubai and the UAE a major hub in the global Knowledge economy.

Through the creation of a nexus for financial institutions and regional corporations and by bringing together global investors and regional issuers, DIFC serves as a catalyst for accelerated and sustainable growth and as the platform of choice for accessing the trillion dollar regional market.

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