ABU DHABI // Laws governing protection for bank customers in the country are outdated, according to a Federal National Council report.
A study by the FNC finance committee found that the banking sector, overseen by the Central Bank, was failing to provide an adequate level of customer service and lacking in Emirati employees.
FNC member Ali Al Nuaimi (Ajman), who helped to compile the report, said four existing laws regulating the banking sector were decades old and needed renewing.
“The number of banks and branches has risen since 1988,” he said. “There are now a lot of new services and great economic growth in the country.”
When it came to customers, the committee found that the Central Bank was lagging behind other countries in ensuring their rights.
Mr Al Nuaimi said contracts drawn up by banks were not being reviewed by the Central Bank or by the consumer protection office at the Ministry of Economy. The contracts usually benefited the bank far more than the customer, he added.
Customers also no longer had account insurance, as is provided in several other countries. During the global financial crisis, the Central Bank adopted a system of providing account insurance up to a certain limit, but the system was later dissolved.
Mr Al Nuaimi said such a system would help to encourage expatriate workers to keep their money in the country, and reassure customers that their money would be safe if a problem arose at their bank.
“We would like this system to be reintroduced,” he said.
The Central Bank, he said, was also neglecting Islamic-banking customers. Although a law dating back to 1985 requires that a higher authority oversees Sharia compliance of these banks, it has never been enacted.
Small and medium-sized businesses (SMEs) suffer from a lack of support from the Central Bank as well, Mr Al Nuaimi said. Banks require a large number of guarantees from these businesses, and the Central Bank offers no assistance.
“This has led to SMEs not evolving in the way that is needed,” he said. “The SMEs are very important to the country. We hope in the next phase they care more about supporting them and helping them grow. We are not saying give them money and get no guarantees back, but give them encouraging prices.”
The committee also looked at the country’s policy of pegging the value of the dirham to the US dollar.
After discussions with officials, they said they found that the Central Bank was not carrying out regular studies on the currency’s effect on the UAE.
“Maybe at some points it had its advantages, but then there are problems because of the tie between the two currencies,” Mr Al Nuaimi said. One of the effects is the declining purchasing power of the US currency, which has led to higher inflation in the UAE.
He said a possible alternative was to gradually move towards pegging the dirham to the value of metals, or several currencies.
“We are not asking for this system to be changed, but to study its effects,” he said.
The committee also examined Emiratisation in the banking sector, and its findings suggested more needed to be done.
The study found cases of banks transferring expatriate-employee work visas to other companies in an effort to manipulate figures. The result was a false increase in the percentage of Emiratis said to be employed in the sector.
“Some places are serious about Emiratisation, but others are not,” Mr Al Nuaimi said.
In 1998, the Cabinet passed a decree that banks should increase the number of Emirati employees by 4 per cent yearly.
The full report and the committee’s findings will be debated publicly in the first half of this year, with the Minister of State for Financial Affair, Obaid Al Tayer, and the Governor of the Central Bank, Sultan Nasser Al Suwaidi.
osalem@thenational.ae
