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Too many banks, too few people

Too many banks, too few people

As reports surface that Emirates Islamic Bank and Dubai Bank could be merging, Kipp takes a closer look at bank mergers in the region. Are there more on the way?

October 4, 2010 4:40 by

The reason why the EIB/Dubai Bank merger is only the second of Gulf bank mergers could be a result of the presence of legislative obstacles and bureaucracy. CEO of The International Bank of Qatar, Gorge Nasra, says that Gulf banks have sufficient resources to create giant financial units capable of competing globally but face great resistance when attempting to merge. “Gulf bank mergers face major obstacles, including local legislations and laws that restrict the ratio of ownership to be acquired and failure of banks to agree on an acceptable merger formula and on the name of the new bank after merger,” says Nasra.

Some are calling for greater incentive schemes to be introduced to encourage potential mergers. Earlier this year, Union of Arab Banks (UAB) Chairman Adnan Ahmed Yousif, speaking to Emirates 24/7, called for more bank mergers in the UAE and urged the UAE Government to come out with schemes to encourage mergers in the banking system
And irrespective of challenges, many consider recent bank mergers will be the tip of the iceberg. Robert Keay, managing director of Ethos Consultancy, which released the 5th Annual Service Quality Bank Benchmarking Study, said, “I have always said there was too many banks in the country for the number of people. [27 retail banks currently operating in the UAE]That is too many, it is incredible … I think there will be more Emirates NBD type mergers ahead without any shadow of a doubt.”

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