UAE customers lash out as Standard Chartered closes small business accounts

The bank said in August that it was exiting the sector because of snowballing compliance issues and a squeeze on profitability.

StanChart announced plans in August to almost entirely exit the SME banking sector in the UAE. Ryan Carter / The National

Standard Chartered has begun winding up thousands of small and medium enterprise (SME) accounts in the UAE, provoking fury among customers.

The bank has sent letters to a number of its SME customers telling them they have a month to close their accounts.

It said in August that it was exiting the sector because of snowballing compliance issues and a squeeze on profitability.

“We regret to notify you that Standard Chartered Bank will no longer be able to provide banking services to you, and your account(s) will be closed 30 days from the date of this letter,” the bank said in a letter sent to an undisclosed number of its business customers last week.

“It is disgusting the way they’ve handled this,” said Louay Al Samarrai, the managing director of Active Public Relations in Dubai, who received a letter on October 9 informing him of his account closure. “They’re giving business owners like us sleepless nights, as it’ll take us a bare minimum of two weeks to set up new banking arrangements. If they care about their reputation at all the least they can do is issue a directive saying that we understand the time crunch we’ve put people in and give them an additional 60 days.

“Right now as far as I’m concerned, if they were the last bank in the world, I’d keep my money in a mattress instead.”

StanChart announced plans in August to almost entirely exit the SME banking sector in the UAE, retaining only a small number of high-value customers.

The immediate trigger for the exit was a sweeping US$300 million (Dh1,102 billion) settlement with US regulators, who said that the bank had failed to adequately identify a series of transactions, many of them emanating from its UAE branches, as high risk.

As part of its August settlement deal with US authorities, Standard Chartered has until the middle of November to exit its high-risk SME clients, it said.

The bank had long been considering an exit from the country’s SME sector amid increasing competition from local banks.

The account closures come after the bank last week abandoned plans to sell off approximately $400m worth of SME corporate loans to other UAE-based banks, according to Bloomberg.

The short time frame for SME customers to make other banking arrangements has a big impact on small business reputations, said a Dubai-based business owner.

“We have ongoing contracts with our customers and suppliers, all of which have our bank details in them, which are now going to have to be changed,” he said, asking to remain anonymous as he was planning legal action against the bank.

“I have been a customer with them for six years and only banking with them. Their way of communicating with their customers is absolutely incredible.

“It’s very bad for our business reputation, as we have to go and explain to our customers … why we’re changing our account.”

StanChart insisted that it was doing all it could to minimise disruption for clients, and was providing letters of reference for clients to take to other banks.

“We are making every effort to ensure that any inconvenience for those clients impacted is minimised and have set up a dedicated contact centre, provided clients with a detailed exit guide and a set of FAQs that minimise confusion and answer our clients’ queries transparently,” said the bank.

But the UAE Central Bank said in August that StanChart’s account closure policy “means that the bank will be liable to prosecution by those companies due to the material and moral damage which is falling on them”.

The Central Bank also said that its Consumer Protection Unit (CPU) would be willing to consider any complaints from companies affected by the move.

The managing director of an online advertising company in Dubai, who did not want to be identified, said that he would file a complaint to the Central Bank against StanChart after receiving notice of his account closure.

He said the bank had “zero notion of customer service”.

A senior official at the Central Bank yesterday declined to comment further on the matter, referring customers to the August statement. Several calls to the CPU yesterday were unanswered. The Central Bank needs to do more to ensure that actions by banks did not have an adverse affect on SME customers, said the Dubai-based businessman.

“I’m in the process of opening another account with Emirates NBD. So far it’s going fine, but what’s to say they won’t do the same thing a year from now? Businesses need to be protected.”

StanChart’s retreat from the SME sector comes a year after HSBC, one of the first international banks to offer services in the UAE, gave many of its SME account holders two months notice to find alternative banking arrangements, provoking anger among its customer base.

HSBC has repeatedly insisted that it remains committed to the SME segment in the UAE, but acknowledged that its focus would be on those that would benefit from its international banking operations.

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