UAE money exchangers raise sector growth worries with central bank
Dubai is the region’s main center for exchanging foreign currencies, sending large amounts of money to and accepting transfers
Money exchange houses in the United Arab Emirates are holding talks with the central bank about planned new capital requirements, amid concern that they might crimp growth in the industry.
Dubai is the region’s main center for exchanging foreign currencies, sending large amounts of money to and accepting transfers from the Middle East, Asia and parts of Europe.
The central bank has been tightening rules for the industry to try to combat money laundering and weed out weaker companies. There are around 140 money exchange houses in the UAE, a country of about 9 million people.
New guidelines for minimum capital came into effect on Jan. 1. Under the rules, companies are required to hold at least 5 million dirhams ($1.4 million) if they offer remittance services, up from the previous level of 2 million dirhams. Firms handling wage payments must have at least 10 million dirhams.
Implementation of another new rule related to the opening of additional branches has been delayed amid confusion about the requirement. The rule says paid-up capital of exchange houses should be raised by 10 percent for the opening of each additional branch.
Osama al Rahma, chairman of the Foreign Exchange and Remittance Group, an industry body, said the group was seeking clarification from the regulator on whether the 10 percent increase was based on an exchange house's capital under the previous rules or under the new requirements.
“We need a balance between the growth in the number of branches which has to take place and the capital requirements, so that we allow business to grow and at the same time don’t burden the business with unnecessary financial requirements,” he said in an interview.
A central bank spokesman did not return calls seeking comment.
But in a circular sent to exchange houses and seen by Reuters, the central bank said it had decided to postpone implementation of the new capital requirements related to additional branches until the end of the second quarter of 2016. It did not give any reason.