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Officials: Exchange companies exit the market for not meeting the requirements of the Central Bank

2019-10-12T22:10:05.354Z

The number of branches of exchange companies increased during the period from 2011 to 2018 by about 552 branches, while the number of companies declined during the same period by about six companies, according to data of the Federal Competitiveness and Statistics Authority.



The number of branches of exchange companies increased during the period from 2011 to 2018 by about 552 branches, while the number of companies decreased during the same period by about six companies, according to data of the Federal Competitiveness and Statistics.

The decline in the number of exchange companies in the UAE is due to their inability to meet the requirements of the Central Bank, which came into effect during the current year. They attributed the high number of branches to the large companies in the market to expand according to the areas that need to provide services, pointing out that the top 20 companies in the market accounted for 90% of the market share.

Exchange companies

In 2012, the number of exchange companies rose to 122 compared to 119 in 2011, the number increased to 134 in 2013 and continued to rise to 140 in 2014, then to 141 in 2015, but declined to 137. In 2016, it rose to 142 companies in 2017, but in 2018 it fell to 113 companies.

The number of branches of these companies grew during this period, rising to 690, compared to 628 in 2011, reaching 786 in 2013, 871 in 2014, 911 in 2015, and 994 in 2016. Then to 1,038 branches in 2017, then to 1,180 branches in 2018, according to data from the Federal Competitiveness and Statistics Authority.

It is noteworthy that the UAE exchange companies have received orders from the Central Bank to raise their working standards, and to comply with these standards by January 2019, before the extension of the deadline until September.

The criteria include requiring exchange companies to hold capital of at least AED 5 million if they offer cash transfer services, up from AED 2 million previously. Paying companies must keep at least 10 million dirhams.

Financial conditions

Mohammed Al Ansari, Chairman of Al-Ansari Exchange Group, said: “Some of the exchange companies were suffering from poor financial conditions and performance during the past years, and were about to exit the market. These companies are in the market. ”

He pointed out that weak companies in open markets, such as the UAE market, often come out of the market, pointing out that this is in the interest of everyone, dealers or other companies, as these companies can not keep up with the market and requirements and development.

He explained that the requirements announced by the Central Bank require additional costs by companies, related to the recruitment of new employees, and may need other companies to change their electronic systems.

Al-Ansari pointed out that the weak companies present in the market are not considered an opportunity for large or medium companies to acquire them, as these companies are ineffective and the number of branches is limited as well as for their performance.

He stressed that his company had entered into talks during the last period with medium-sized companies to acquire them, but those companies have always been overpriced in price above market price and fair, in his opinion.

He pointed out that the market during the past periods has also seen investors from outside the exchange sector to acquire or acquire a stake in other companies in the market, in order to strengthen its performance and make it competitive.

He pointed out that the exit of exchange companies from the market did not positively affect the market share of other companies, indicating that the dealings of those companies were limited and their market share is very small. He added that companies in the market are always expanding both in terms of launching new branches or expanding the use of technological means to meet the needs of customers.

New standards

For his part, the CEO of Alfardan Exchange, Vice Chairman of the Board of Directors of "Banking and Financial Institutions", Osama Al Rahma, predicted that "some companies will emerge from the market during the coming period due to their inability to comply with the standards of the Central Bank."

He explained that the Central Bank launched a set of standards and regulations before exchange companies three years ago, and gave the companies in the market enough time to apply them to protect dealers and the system as a whole, pointing out that those standards came into force during the current year.

The deadline for compliance with capital requirements had expired last month.

He pointed out that the Central Bank is conducting a continuous inspection on exchange companies, and imposes fines on violators and those who did not meet the new standards.

Al Rahma pointed out that small companies realized that they would not be able to comply with those requirements, and felt that their operating cost would be high if they met those standards, and emerged from the market, pointing out that at the same time that major companies have acquired during the last year medium companies in the market .

He stressed that the exit of these companies did not affect the market and did not create a gap, especially since the number is limited.

He continued: «The top 20 companies account for 90% of the market share of transactions of exchange companies in the country».

Number of companies

Abdulkareem Al Kayed, Regional Director of UAE Exchange, said: “The decline in the number of exchange companies is due to the inability of some companies to meet the requirements of the Central Bank. Through the possible means, whether through the opening of new branches or the development of digital services, as well as self-service devices that are currently limited within the branches of companies.

"By the end of last year we opened six new branches, and we moved a number of branches to other areas, as we opened two new branches this year," he said.

He pointed out that the growth rate of remittances in his company is still unchanged, pointing out that this means that it did not benefit from the decline in the number of exchange companies in the market.

As for the opportunities to acquire exchange companies, Al Kayed said that his company prefers more expansion through the means possible, away from the acquisition of existing exchange companies.

Weak companies in open markets, such as the UAE, are in everyone's interest.

«Central» monitors exchange companies and imposes fines on violators.

Source: emara

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