Banking System in the UAE: Unique Features

In 2023, three banks from the UAE were included in the Forbes ranking of the best banks in the world: Emirates NBD in Dubai, and Abu Dhabi Commercial Bank and First Abu Dhabi Bank in Abu Dhabi. UAE banks are widely recognized for their advanced electronic services and digital banking platforms. 

But for newcomers the banking environment in the UAE might be initially puzzling. Let's talk about the primary bank categories in the UAE and introduce you to the key concepts you're likely to come across.

A quick overview of the UAE banking system

The UAE’s banking system is among the most stable and modern in the world. Throughout its history, there hasn't been a single instance of bankruptcy among the UAE banks. This is due to the strict requirements imposed by the Central Bank, ensuring that all credit and banking institutions maintain sufficient capital to survive crises. Just look at the banking exchange rate between the dirham and the US dollar — it has remained practically unchanged since 1997.

If you've owned or currently run a company in Europe or Asia and have experience dealing with banks there, you'll notice a significant difference when engaging with banks in the UAE. While bank account checks do occur, they're less frequent, sparing you from unnecessary paperwork associated with justifying each transaction or operation and gathering and submitting related documents.

The UAE also places a strong emphasis on technology. You'll be amazed by the range of possibilities offered by internet banking in the UAE, including various high-tech payment acceptance devices, contactless payment cards, fingerprint scanning for payments, and much more.

3 Unique Features of the Banking System in the UAE

The banking system in the United Arab Emirates is quite unique. Let's explore three of features that make it stand:

1. Banks typically follow the operating hours of government institutions, with most branches open from 08:00 to 15:00. (Operating hours may vary depending on the location of the branch and individual bank policies). ATMs generally operate round the clock, although availability can be influenced by the location. For instance, ATMs situated in shopping centers may only be accessible during the center's opening hours.

2. To align with international standards, the UAE Central Bank has adopted a Know Your Customer (KYC) policy. This system aims to meticulously verify clients' personal information. Banks solicit documents from applicants, conduct detailed inquiries, and may seek feedback on transactions. The digital exchange of data and documents online has expedited banking procedures with clients and enhanced transparency within the system.

3. In the UAE, some Free Zones like the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market (ADGM), have their own regulatory bodies rather than being overseen by the Central Bank.

4 categories of banks in the UAE

In the UAE, banks are categorized differently depending on the types of clients they serve and the services they offer. Here are four categories you're most likely to come across in the UAE:

1. Commercial Banks: You are most likely to become a client of this type of bank when you come to the UAE — it’s the closest match to banks we have in Europe or the US. Commercial banks are also the most prevalent in the Emirates. They offer a wide range of financial services: deposits, loans, and credit facilities and open personal and corporate accounts.

2. Investment Banks: Work with corporations, governments, and high-net-worth individuals. Banks in this category focus on large and complex financial transactions, like  raising capital through underwriting securities issuance, IPOs, and debt offerings. 

3. Industrial Banks: Cater to manufacturing, construction, energy, and transportation sectors. Their services include project financing, equity investments, and technical assistance to support large-scale projects. They often work closely with government agencies, private investors, and international financial institutions to find new investment opportunities and support development of infrastructure in the UAE.

4. Islamic Banks: Islamic banks operate in accordance with Islamic principles, which prohibit the payment or receipt of interest (riba) and promote risk-sharing and ethical financial transactions. These banks offer a range of Sharia-compliant financial products: Interest-free banking, profit-sharing investments, and ethical financing options.

In addition to these four categories, there are other specialized banks in the UAE that cater to specific sectors. For example, there are agricultural banks, housing finance banks, and export-import banks.

You can also group banks in the UAE based on whether they are regional or international. Examples of Regional banks are like Emirates NBD, First Abu Dhabi Bank, and Dubai Islamic Bank. Some international banks that have branches in the UAE are Citibank, Standard Chartered, and HSBC.

Conclusions

In this article, our aim has been to offer you an overview of the banking system in the UAE, along with its unique features, and introduce you to the unique banking concepts you’re likely to encounter as a newcomer in the Emirates.

If you’re learning about ways to open a bank account, contact us https://uppersetup.com/en/contacts. We've put together a step-by-step guide on opening a bank account in the UAE.