The main issue in this paper is about the new proposed bank policy and regulation concerning the exposure of various bank industries to government sectors in Dubai (Scanning Report Sample, n.d.). There is a new regulation regarding Central Bank and other financial institutions in Dubai that aim at reducing vulnerability to United Emirates Banks systems as well as providing liquidity. However, most banks in the region are rejecting and objecting the policy arguing that they have enough procedures to avoid financial crisis in the banking industry as was witnessed in the 2008-2009 financial crisis. According to International Monetary Fund (IMF), the new proposed policy is very critical in the protection of the banking industry future assets and can be used by the banks to prevent the repeat of the serious debts experienced during the 2008 financial crisis (Scanning Report Sample, n.d.). Therefore, the main issue in this paper is about the new proposed policy regarding the involvement of government entities into bank procedures and how it can be properly implemented. The policy aims at preventing liquidity problems and challenges in the UAE banking industry especially on matters concerning government lending and loaning systems from banks (Scanning Report Sample, n.d.).
Another most important issues discussed in the article is about the mortgage criteria policy system and its impact on the National Bank of Abu Dhabi (Scanning Report Sample, n.d.). There is also the Dubai Islamic Bank smart bank initiative program (DIB Announces a Smart Bank Initiative, 2014).The Dubai Islamic Bank has launched a smart bank initiative program that will promote their customers focus and client’s interactions in order to cover the varieties of customers that the bank currently enjoys. The program is in line with the Smart City policies of the government of Dubai. According to Dr. Adnan Chilwan, who is the current bank Chief Executive Officer, the program will provide long term procedures and client base focus (DIB Announces a Smart Bank Initiative, 2014). This is because the program involves the use of technology as well as transforming the global banking industry in order to cover even the employees, customers as well as other stakeholders in the banking system (DIB Announces a Smart Bank Initiative, 2014).
The system will involve providing digital services to customers without involving paper work and transactions. It will promote customers sustainability and centricity in the banking sector. Today, most of the Dubai Islamic Bank customers can comfortably open their accounts and get their ATM cards as well as cheque books within less than sixteen minutes (DIB Announces a Smart Bank Initiative, 2014).The system is fully integrated with Emirates Identity Authority customers transaction systems and this allow for easier uploading of customers information to the Emirates national identity cards as well as into the bank systems. Customer’s information’s are organized and handled with electronic machines involving the use of digital signatures. Filling of forms are eliminated to promote faster processing of customer’s information’s in the system (DIB Announces a Smart Bank Initiative, 2014).Out of all the ninety branches of the bank, the program currently covers around twelve branches and the rest will be covered by the end of October this year. The Dubai Islamic Bank is also planning to work closely with the Dubai Government to promote the Smart Bank Initiative plan that will allow electronic linkage of various government materials and also promotes government to supply financial issues as well as salary payments (DIB Announces a Smart Bank Initiative, 2014).This automotive electronic payment system will allow the bank and various government sectors to effectively send payments to various suppliers in the country. The system will also allow the employees to receive their salaries through various electronic systems provided by the Dubai Islamic Bank (DIB Announces a Smart Bank Initiative, 2014).
The new proposed policy system concerning government entities involvement in bank industry procedures will have a number of impacts on various bank sectors as well as on the National Bank of Abu Dhabi (Scanning Report Sample, n.d.)This calls for faster adaptation of the bank system in order to gain from the Central Bank new regulation policy. This is because the new policy will affect the relations between various bank and government sectors. It may result into poor market policies and promote diversity of in the banking business. However, the mortgage policy will promote the financial data of the banks as it will provide a number of conservative lending procedures especially in various residential dealing with real estate practices. It is also clear from the National Bank of Abu Dhabi management system that implementation of new policy concerning banks’ exposure to the government will lead to a number of challenges and may limit the government systems dealings in the bank system (Scanning Report Sample, n.d.)
On the other hand, the new policy on mortgage system will at last support and improve the credit data profile of the UAE bank industry. This will attract more property developers as well as real estate investors in the bank. It is therefore, urgently required that various banks comply with new bank policy concerning bank close interaction with government systems in order to prevent bad debts that may arise from various government sectors. It is also urgent that the new regulation concerning mortgages be implemented as it will promote property development in the country as well as have positive impact on the financial ratings of the banks. Research also indicates that bank exposure to government sectors has high impact and may result into financial crisis and it is critical that a policy be set to regulate the amount of money that financial institutions can lend to the government (Scanning Report Sample, n.d.). According to the UAE’S Central Bank the policy has moderate urgency and the amount given to the government can be adjusted according to the financial condition of the bank (Scanning Report Sample, n.d.). The mortgage criteria policy will provide moderate effect as well as moderate urgency on the bank industry because it will attract more real estate investors and promote the credit data of the UAE bank system (Scanning Report Sample, n.d.).
The major strength of the new proposed policy is that seventy percent of the National Bank of Abu Dhabi is owned by the government through Abu Dhabi Investment system (Scanning Report Sample, n.d.) This will enable the government to support the new policy in order to provide more reliable and credible structures in the bank industry. NBAD is also one of the best banks in the UAE banking industry. The policy will also provide an opportunity for the NBAD to prevent liquidity shortage and improve bank performance as well. The only weakness of the policy is that all the UAE banking sectors will adopt the policy and this may affect loaning system of various customers from the banks. This is because the policy increases the number of requirements for mortgage loan systems (Scanning Report Sample, n.d.)
It is recommended that the UAE bank industry adopt these new policies as they will provide financial sustainability, prevent financial crisis as well as promote property development system within the banking industry. The banks should also adhere to the policy according to Central Bank rules and regulations. Government sectors loan procedures should be properly reviewed to avoid liquidity challenges. The banks should also adopt the mortgage policy in order to prevent market problems as well as financial losses in the banking industry. Government lending and loaning systems must be restructured, reviewed and be properly controlled according to the new proposed policies.