Three UAE banks confirmed a merger after markets closed yesterday. "All three banks have one mutual majority shareholder, the Abu Dhabi Investment Council (ADIC) -- which owns more than 60 percent of ADCB and 50 percent of UNB. It owns 100 percent of Bank Al Hilal, which is not publicly listed." The new bank, retaining the ADCB name, will become third-biggest lender in the country after First Bank Abu Dhabi and Emirates NBD. Further consolidation appears likely and despite the positive spin, these changes are flagging up the major problems facing the region and the central partnership of Abu Dhabi and Saudi Arabia. Abu Dhabi had moved to exert more control within the UAE in recent years, driving a partnership with Saudi Arabia that is not going down so well in its more commercially-minded emirate Dubai. Lest we forget, the emirate of Sharjah's Investbank was rescued in December though details remain scant. In a not totally unrelated move, the UAE and Saudi Arabia are moving on plans to develop a digital asset or cryptocurrency for the movement of payments between both countries, to be named the Aber. But is the push on digital assets a distraction from bigger issues in the UAE?
As we roll out our new services on credit cards and digital lending, we've been paying close attention to SME lending and noting how much of the flowery language around digital banking is migrating into SME banking. Bearing in mind that "personalised" digital offerings don't offer persons, we suspect that most SMEs need more than automated services. Yet it's the highly automated digital lenders hitting the headlines, such as in this FT piece, which notes that lenders such as Kabbage — feted as a digital alternative — offers short terms loans that translate into annual rates north of 30 or 40 percent. "The lenders themselves say they have found an under-served market and that new data sources mean they can underwrite risks that were previously too hard to capture," notes the FT. One commenter simply notes that this seems like the exact formula offered by subprime lenders. Well worth a read.
As news emerges in the last days that a no-deal Brexit is not only possibly but now likely, businesses will have to add another layer to their preparations — and fast. A note from card wallet Curve yesterday illustrates the challenges facing businesses as they start to prepare for a no-deal Brexit. The Curve card is currently issued out of the UK by Wirecard Card Solutions Limited under an electronic money issuer licence, and uses EU passporting rights to serve customers across the EU. That will change in the event of a no-deal Brexit, with WDCS no longer able to serve European customers, who will be switched to the German company's bank. "The main change will be that Curve will be issued by Wirecard Bank AG, a sister company of WDCS, in place of WDCS. Wirecard Bank AG is a credit institution, authorised in Germany and supervised by the German financial services regulator, Bundesanstalt für Finanzdienstleistungsaufsicht (or "BaFin")."
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