Saudi Arabia is the largest economy in the region and is very important for us. We are working with both the government and private sectors to see how we can support them.
launch of the ADGM by a presidential decree in 2013.
Since then, the ADGM had a slow, steady and cautious preparation period, much in keeping with the overall approach of Abu Dhabi policymakers, before the official “open” sign was hung up in October 2015.
Like the more established center in Dubai, it rests on three main operating branches — a registration arm that oversees and administers the center; a common-law courts system; and the FSRA, the independent regulator that Teng runs. Its home is the Al-Maryah Island district of Abu Dhabi, which is part of the portfolio of the government- owned Mubadala Investment Company.
It has the capacity to provide the full spectrum of financial services, from private banking to investment banking and all else in between, but so far has focused on wealth and asset management, funds, financial technology (fintech) and other niche services like special purpose vehicles (SPV), real estate investment trusts and aviation leasing.
Some observers have criticized the pace of growth, but the figures do not bear that out. ADGM has 340 full members, including 26 financial institutions licensed by the Financial Services Regulatory Authority. That compares well with other regional centers at a similar stage of development. “We have witnessed the fastest pace of growth of assets under management in the Middle East and North Africa (MENA),” Teng said.
There are some big names on the financial list — Macquarie Capital, Aberdeen Asset Management, Northern Trust and most recently UniCredit Bank of Italy. The local financial industry has been getting behind the center too, with Abu Dhabi Financial Group (ADFG) and MDC Capital Management, an important investment arm of Mubadala.
Is there any sign of the “big one”: A mega-bank like Goldman Sachs or Morgan Stanley signing up for the ADGM? Teng prefers to keep his counsel on this question: “We have seen the ‘big unicorns’ coming into the region with Amazon’s bid for Souq.com and I think that’s telling us something. After the global financial crisis, lots of Western institutions went in for some quite serious cost-cutting, in this region as well as elsewhere. Now they are looking again at the Gulf and the Middle East. US institutions are looking again seriously at the region as a place to be based and to do business,” he said guardedly.
In the absence so far of the “big one,” Teng has been looking at other areas as well as wealth and asset management. Fintech has been a big focus over the past year, since the ADGM chairman, Ahmed Al-Sayegh, declared his intention to make the center the “capital” of fintech in the Middle East.
A special “regulatory laboratory” regime was set up to encourage fintech entrepreneurs to join the ADGM, with less onerous rules than full financial members and the first five successful applicants — from UAE, India and the West — have been chosen. A second batch is expected to follow soon.
Teng has also signed a partnership with the Singapore authorities to exploit the highly successful “sandbox” model that has helped the city-state become the Asian leader in fintech.
“It provides access to capital with the appropriate level of regulation. There will be more to come on this. We are looking to create a ‘bridge’ with Singapore to create capital and markets for fintech,” he said.
The ADGM was recently ranked the No. 1 hub in the MENA region for fintech by the global accounting and consulting firm Deloitte. Further fintech collaboration with Saudi Arabia is also a possibility.
Other specialisms have accompanied the growth. SPVs — corporate structures designed for particular types of transaction — have been a focus, with a particular appeal for family offices and other private investors. Real estate investment trusts have also seen the attractions of ADGM’s regulatory offering.
One groundbreaking initiative was to develop specialist skills in the aircraft- leasing sector. European financial group Natixis teamed up with Abu Dhabi airline Etihad in a leasing deal recently, and more is expected. “We want to get more of those and further develop our expertise in aviation finance. We have some of the biggest airlines in the world and it makes no sense for that business to be done abroad, in London or Dublin,” Teng said.
The growth looks set to accelerate with the improving economic outlook in the Gulf, a lessening of government “austerity” programs and a stabilization of the oil price.