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Tuesday February 9, 2010

Abu Dhabi bank plans to start operating in Malaysia

daljit@thestar.com.,my

PETALING JAYA: The National Bank of Abu Dhabi (NBAD), one of the United Arab Emirates’ (UAE) biggest banks, plans to start commercial banking operations in Malaysia following the Government’s move to liberalise the financial services sector.

The bank, according to sources, is one of the foreign banks vying for a licence to operate in Malaysia under the liberalisation plan.

Contrary to the general perception that it would solely pursue Islamic banking, sources said it was keen on commercial banking avenues.

A source told StarBiz that one of the possible areas of focus for the bank would be in the small and medium enterprise (SME) segment.

“NBAD is strong in the SME business in UAE and Malaysia as a developing nation with more than 90% of total businesses comprising SMEs is a good fit for the foreign bank,” he said.

“Since SME is one of the fastest growing business segments in the country, NBAD will use its experience and expertise to offer niche products and services to this segment. This will help it leverage and ride out the stiff competition in the local banking sector arising from the liberalisation.’’

When contacted on whether NBAD was a likely candidate for the foreign banking licence, Bank Negara said it would not comment on specific financial institutions.

Analysts view the move by NBAD to pursue commercial banking operations as a surprising one as a Middle Eastern Bank would normally focus on Islamic banking. A banking analyst opined that the emergence of NBAD would add to the depth and breadth of the SME market, a backbone of the Malaysian economy.

NBAD, which is listed on the Abu Dhabi Securities Exchange, was incorporated in 1968 and is majority owned by the Abu Dhabi government.

It has operations in 12 countries on four continents and was rated as one of the 50 safest banks in the world.

News on NBAD in the local financial scene emerged in the wake of Prime Minister Datuk Seri Najib Tun Razak’s state visit to the Middle East last month.

The likelihood of Bank Negara granting the licence to NBAD, according a Malaysia-based online portal, was mentioned during a meeting between Najib and Khaldoun al-Mubarak, the chairman of Abu Dhabi’s Executive Affairs Authority and the managing director of Mubadala, an investment group that has varied interests in Malaysia.

In April last year, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from 2009 until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.

The decision by the central bank on the successful applications of foreign banking licences would be announced by June. It is currently evaluating and processing the applications.

The deadline for applications lapsed in December last year.

Under the liberalisation measures for the financial sector, up to two new commercial banking licences would be issued to qualified foreign players in specialised areas and up to three for foreign players that offer significant value propositions.

For Islamic finance, the measures would see up to two new licences for Islamic banking with a minimum paid-up capital of US$1bil, as well as up to two new licences for family takaful.

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