HSBC is to close a number of accounts held by UAE small and medium-sized enterprises (SMEs), sparking fierce customer anger over the imminent halt in services.
Businesses subject to account closures have been given just 60 days’ notice to find alternative banking services, and some estimate it will cost them more than Dh8,000 in fees to switch accounts.
The SMEs subject to account closures have been informed that they must destroy unused checks and clear credit card balances within that time, according to a letter from the bank seen by Al Arabiya.
HSBC refused to say how many SME accounts would be terminated, in a move it said was part of a streamlining of its global businesses that began in May 2011.
Despite the imminent closures, HSBC insisted that it “remains strongly committed to the SME segment in the UAE.”
Yet one disgruntled customer told Al Arabiya that HSBC’s move means that the bank is “attacking SMEs”.
The customer said that the inconvenience caused by the account closures was compounded by the fact that the notice period coincides with summer and Ramadan.
“HSBC is a respected international bank. I don’t think they should allow their UAE operation to damage the brand in this way,” the customer, who did not wish to be named, told Al Arabiya.
“If HSBC UAE really is going to go ahead, they should give six months’ [notice], not 60 days. It’s summer, and Ramadan. Business owners are on holiday. Bank employees will be on short days. Even during normal parts of the year it takes eight weeks to set up a company bank account. They haven’t thought this through at all.”
The HSBC customer estimated that it will cost his business between Dh8,000 and Dh9,000 to change accounts – and feared even worse penalties for some other SME owners, should HSBC checks they had issued bounce.
“In the current business climate, small business customers are taking more than 60 days to pay. Profitable small businesses will be damaged if invoice collection is disrupted. Companies could also be subject to criminal action for post-dated rent checks that don’t clear. Opening new accounts will also cost small businesses thousands of dollars in additional attestation and legalization,” the customer told Al Arabiya.
HSBC suggested that the closures mainly involve SMEs that do not have significant business activities outside the UAE.
“The bank is reviewing its portfolio of small business customers in the UAE. As a result, HSBC will be closing some of its Business Banking accounts,” a spokesman told Al Arabiya.
“The goal of the review is to identify SMEs that operate across borders, or intend to in the near future. Because international business is at the heart of HSBC's strategy, these are the customers whose needs it is best-placed to address.”
Other criteria behind HSBC’s decision to close certain accounts also include the size of the business, the number of products it holds with the bank, and the number of transactions made, according to a letter seen by Al Arabiya.
HSBC said in February that it is stopping personal-banking services to some customers with links to Iran and Syria, due to the Western sanctions imposed on those countries.
It is believed that a few SME accounts will be closed on similar grounds, but that many will be shut purely for commercial reasons.
One regional entrepreneur slammed the move by HSBC, saying there was a strong business case for banks to support young businesses.
“It’s madness for a bank not to support SMEs – they are the future,” said Christopher Thomas, chief executive and co-founder of the regional crowd-funding site Eureeca.
“[They need to] invest in SMEs now to maintain a relationship with them once they’re big businesses,” he added.
HSBC Holdings also said today that it is considering selling its majority stake in Iraq's Dar Es Salaam Investment Bank, which has made it the main international lender in the war-torn country.
A move to sell the 70.1 percent stake in that business would mark a further rationalization of HSBC’s Middle East operations.