Abu Dhabi Global Market recognises regulatory soul mate in Singapore

There are a lot of financial regulators in the world. Virtually every country which is part of the global financial system, from Afghanistan to Zambia, has at least one watchdog to oversee financial business.

America has eight, one fewer than its northern neighbour Canada, although each state of the US also has its own regulatory set-up. Most sovereign states have between two and four, sometimes with a separate overseer of the insurance business.

The UAE currently has four, including the Central Bank and Insurance Authority, in addition to the federal Securities and Exchange Authority and the Dubai International Financial Services Authority.

To this will soon be added a fifth, as the Abu Dhabi Global Market gears up to its launch as a fully-fledged financial free zone in the capital.

This is not a case of regulatory overkill. The ADGM is fully committed to become a global financial services hub, and an independent regulatory function is an essential ingredient in the overall offering. International financial firms demand it.

Recognising this, the growing team of executives under the chairman Ahmed Al Sayegh, who are carefully putting the pieces together on Al Maryah Island, have devoted a lot of time to getting the regulatory regime right. They have many models before them, but are conscious of the need to create something unique for Abu Dhabi.

So with this wide array of regulatory templates before them, which is the most likely to take the eye of ADGM?

The regimes in the West, notably London, New York and Frankfurt, have longevity and sophistication to offer. But you could argue that the global financial crisis of 2009 was a permanently damaging event, in two senses.

Western regulators failed to spot the warning signs of financial crisis, but have also, many experts agree, gone overboard in their post-crisis reaction. More and tougher regulation has certainly reduced the attraction of western regulatory models.

If in doubt on this point, try to read, let alone understand and implement, the 848 pages of the Dodd-Frank Act, America’s regulatory response to the crisis.

In London, tougher new rules have already led to the resignations of top bankers at HSBC, and more look set to follow.

So it looks unlikely that ADGM will take too much from western regulatory models, apart from their high standards.

Located as it is at the heart of global financial time zones, ADGM can just as easily look East for examples. The emerging financial centres in the global growth centres of Asia offer valuable lessons in how to assemble a regulatory regime that is both sufficiently flexible to attract market participants, but with enough integrity, competence and professionalism to ensure orderly and prosperous financial business.

There are many to choose from here, with Hong Kong, Shanghai and even Kuala Lumpur making serious efforts to become the financial hub of the huge east Asian region.

But one centre has appealed to ADGM more than the others: Singapore. The island-city appears to be doing everything right, challenging its rivals to the north despite their natural advantage of proximity to China, the great economic powerhouse of the region.

The capital is comfortable and familiar with the Singaporean model; it used the country as one of the case studies when it was drawing up the Abu Dhabi 2030 development strategy.

Singapore has made itself the leading centre in Asia for foreign exchange and commodities trading, but more importantly for ADGM it is also presenting a serious challenge to Hong Kong, and even to Switzerland, as the global centre for private banking, wealth and asset management.

These sectors are regarded by ADGM as vital components of the new financial hub in the capital, exploiting Abu Dhabi’s reputation as a sound manager of money.

The wealth management industry – including private banking and asset management – is shifting inexorably eastward. In the dry words of one financial expert “pervasive regulatory pressures are driving cultural change in wealth management”.

Increasingly, they trust more flexible and business-friendly regimes such as Singapore, and the architects on Al Maryah believe, they will trust ADGM when it is up and running under an appropriate regulatory regime.

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