Surging private wealth in the region has attracted a number of private banks to the region with 61 private banks currently present in the Gulf Cooperation Council (GCC) countries, according to a recent study by Insight Discovery.
The study shows that 30 international private banks, with headquarters in Europe or North America, have offices in Dubai. The regional/local organisations have an office in at least one of the GCC countries. Each of these private banks perceives that the number and aggregate wealth of the region’s high-net-worth individuals (HNWIs) presents an opportunity.
“We agree with the general consensus that private banking is developing more rapidly in the GCC than in established markets such as Europe and North America. Moreover, it is clear that Dubai has emerged as the regional hub for the provision of private banking (and related) services HNWIs,” said Nigel Sillitoe, CEO of Insight Discovery.
Earlier this year Capgemini and RBC Wealth Management published their ‘2013 World Wealth Report’, which provides insights into the HNWIs (people with $1 million or more in investable assets). The report found, in 2012, the Middle East was home to around half a million HWNIs (out of 12 million globally) who, collectively, had investable wealth of $1.8 trillion (out of $46.2 trillion globally).
In absolute terms, the numbers of HNWIs of the GCC countries, and the wealth that they own, are considerable. This presents an opportunity for private banks that have a presence in the GCC. The opportunity is growing with the presence of significant numbers of mass affluent (including expatriate) customers.
Although several cities in the GCC region have clear advantages as financial centres, Dubai stands out as the regional hub for private banks. All of the 30 international private banks that have a presence in the region are based in Dubai, as are a number of the regional/local private banks.
Much of the business that is conducted with HNWIs (and/or mass affluent) customers in the region is booked in international financial centres (IFCs) that are remote from the GCC countries. This is often what the client wants and/or is efficient from the point of view of the private bank.
Switzerland (and, in particular, Geneva) stands out as the main IFC.
Other favoured IFCs where GCC business is booked include Singapore and the Channel Islands. Because of the tendency for private banking business that is sourced from the GCC region to be booked in IFCs that are remote from the region, it is often very difficult to quantify the assets under management (AUM) that are being derived from clients in the GCC countries.
For this reason, it is often much harder to identify the benefits of a physical presence in the region.
“For a number of valid reasons, many of the private banks serve their clients in the GCC region through their offices in other international financial centres (IFCs). Therefore, it will be interesting to see how Dubai and the other centres in the GCC region, which have ambitions in private banking, evolve over time,” said Sillitoe.
According to the latest Global Financial Centres Index (GFCI) rankings compiled by Z/Yen in early 2013, Dubai is in 23rd place globally (between Osaka and Shanghai). Qatar/Doha is in 30th place (between Oslo and Guernsey); Riyadh, in 33rd (between Stockholm and Amsterdam.
Meanwhile, Abu Dhabi is 39th place (between Shenzhen and Rome). Elsewhere in the region, Bahrain is in 64th place (between Warsaw and Moscow).
By Babu Das Augustine
