Abu Dhabi’s International Financial Centre has now opened its doors for global as well as local applications to launch digital banks. The world itself has transformed in the last few years due to the digitalisation of the banking industry, and every sector is now vulnerable to complete transformation. The FSRA (Financial Services Regulatory Authority) of the Abu Dhabi Global market is the authority that has introduced this initiative.
This comes as a response to many enquiries, regional as well as international asking for a conclusive and proven environment that accelerates growth and market development. Now with numerous innovative and supportive activities in the Middle Eastern North African Regions to anchor corporations, ADGM has established itself as an environment and jurisdiction for digital banking. Apart from banking, numerous financial services like auditing,accounting and taxation in Abu Dhabi is a mandate for any firm including banking as well.
A digital bank is a banking facility that has a peculiar method of transacting. It is where all deposits and other financial related activities are carried out through online services or using the internet or other electronic means rather than physical interactions. This allows for transactions during closed hours or odd hours. These financial institutions look to provide innovative solutions to customer related as well as trade-related problems. The FSRA's view is that Digital Banks in Abu Dhabi's ADGM will significantly affect the value of the SME, corporate and wholesale sector. Moreover, this move is said to contribute to the overall development of the financial ecosystem. This will enable to ADGM to be more inclusive and thereby enhance the financial market as well. This is excellent news for the emirates’ auditors as well and for those looking to avail auditing services in abu dhabi.
“This announcement and the Guidance come in response to substantive interest from the industry and demonstrates ADGM's track record in supporting growth and improving innovation while managing risks to promote a strong and sustainable financial ecosystem. Digi banks can address the needs of many sectors that are currently inadequately served by conventional institutions, such as the credit gap faced by medium and small enterprises. We welcome innovative models to bring about wider financial inclusion, meet the needs of underserved sectors and reduce costs for consumers. Digi banks will further complement Abu Dhabi and the region's financial and banking sector, reinforcing its competitiveness, vibrancy and resilience” said Mr Richard Teng, CEO, FSRA of the ADGM.
Digi Bank Applications and Criteria
The FSRA has agreed to accept applications submitted by conventional banks to establish the said digital banks as well as branches of digital banks. Further, it has stated that it will accept applications from firms with resourceful value propositions. ADGM also accepts partnerships between financial institutions and technology companies in looking to apply for a digital banking license. However, these might need accounting servcies
To maintain the level of high quality applicants that safeguard systemic stability as well as meet prudential requirements, the FSRA has laid a minimum base capital requirement of 10 Million USD ( 37 Million AED approx.), compliance and risk management policies, robust governance structures, IT security measures as well as mandatory senior managerial appointments. With regard to this, the FSRA is giving out a guide for authorisation of Digi-banks in the ADGM.
The applications will be assessed for a digital banking license depending on the type of new creative solutions to be provided by the applicants. Firms looking to provide innovative solutions in the payment department, such as tokens, e-wallets, and stored value card, can consider applying for other forms of license that will incur lower capital burden as well as attract lesser regulation than a full-fledged digital banking licence.
Situated right in the capital of the UAE, the ADGM is an investor’s paradise. It is a free zone with an efficient as well as a concrete business environment which is ideal for firms operating in the financial industry. ADGM's strategy is a solid structure due to the presence of private banking, asset management, wealth management, financial innovation. Operations which began in the year 2015, the ADGM has come a long way making substantial progress from a global as well as a domestic perspective. Since its inception, it has held the award for “Financial Centre of the Year" (in the MENA Region) for an astounding three years for its contributions towards the region and initiatives were taken to improve the capital and financial market industry in the MENA region.