Abraaj collapse pushes Dubai regulator to strengthen oversight

Pedro Gonçalves
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Abraaj collapse pushes Dubai regulator to strengthen oversight

Dubai's financial regulator has pledged to tighten controls in the wake of the collapse of Abraaj Group last year, once one of the most influential emerging-market investors with nearly $14bn of assets under management. 

The Dubai Financial Services Authority (DFSA), which regulates entities operating out of the Dubai International Financial Centre (DIFC), will "be reviewing our risk-based approach to supervision to ensure that it properly captures some of the features of the particular case", DFSA chief executive Bryan Stirewalt said in his preface to the DFSA's 2019-20 business plan, released on Sunday.

"In addition, we will examine whether our regime addresses correctly the situation where firms locate legal entities providing services to each other in different locations, which can complicate supervision."

[The DFSA] will be reviewing our risk-based approach to supervision to ensure that it properly captures some of the features of the particular case"

Abraaj collapsed last year, months after investors began an investigation into mismanagement of money in its healthcare fund.

While the DFSA licensed Abraaj Capital Limited (ACL) to carry on regulated activities within the Dubai International Financial Centre (DIFC), it did not regulate Abraaj Holdings, Abraaj Investment Management Limited or license the firms private equity firms, which were all registered in the Cayman Islands.

In August 2018, the DFSA moved to stop Abraaj Capital Limited from taking on new business or moving money while investigations into the group were ongoing.

"Given the importance of the Abraaj Group as a large private equity group in the Middle East and its connections with Dubai - if the DFSA concludes, following our investigations, that there are lessons to be learned, we will take steps to strengthen our supervisory oversight going forward," Stirewalt said.

The DIFC banking sector comprises 33 commercial banks located in the DIFC, with total assets reaching $155bn as of the end of 4Q2018. The DIFC is also home to 20 reinsurers and 60 insurance intermediaries.

The collapse of Abraaj "will influence our thinking on corporate governance, on the allocation of responsibilities among the senior management of firms, and on the best way to assign responsibility for compliance within regulated firms," Stirewalt added.