The Arab world is overbanked at least three-fold, and unless the banks take steps to merge, the ultimate victim will be profitability, The Gulf News reported.
George Kardouche, chief executive of the Arab Bankers Association (ABA), was quoted by the daily as saying that the Arab world needed only about 150 banks instead of the present 450, noting that in the UAE there are 20 national banks with 253 branches and 27 foreign banks with 110 branches plus various representative offices of several foreign banks.
Kardouche said that "more than important factors like financials and shareholders' consent, it is the personality problems that pose a stumbling block to bank mergers in this region."
Unless this "ego issue" is sorted out, local banks will have to pay a price for ignoring this, considering that UAE has joined the WTO, he said. Recently, a serious move in the UAE between National Bank of Dubai and Emirates Bank International (EBI) could not be completed.
However, several banks believe that given the growth of business in the UAE, the number of banks is still not too high. They argue that cost-income ratios are still favorable and the net return on capital is growing, said the report.
"More than the present competition emerging from so-called overbanking, it is the e-banking which is going to pose a danger to the banks which are not prepared for it," they say. In the next few years a majority of Arab banks are expected to upgrade their IT systems with online banking and e-security high on the agenda.
"And before serious buying begins, banks should look to benchmark their security requirements and outline a regional approach to prevent cyber banking crime." According to ABA, Middle East businesses could end up spending $100 million within the next two or three years on beefing up their IT security systems. A study by the American Society for Industrial Security shows that there are an estimated 50,000 viruses currently in cyberland – Albawaba.com
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