The GTR Mena editorial board gathered in Dubai to discuss how recent events in the region have affected access to and provision of trade finance. Oil prices, SME financing and Islamic trade financing were hot topics on the agenda.

Roundtable participants

  • Maninder Bhandari, founding partner, Encore Group; director, Derby Group (chair)
  • Murali Subramanian, head of transaction banking, Abu Dhabi Commercial Bank
  • Manoj Menon, global head of transaction services & financial institutions, First Gulf Bank
  • Lakshmanan Sankaran, head of trade finance, Commercial Bank of Dubai
  • Baihas Baghdadi, managing director, head of trade & working capital international, Barclays
  • Ziad Ghosn, head of financial institutions and trade finance, BankMed
  • Kamel Alzarka, chairman and founder, Falcon Group
  • Kazim Ali, head of corporate banking, Noor Bank
  • Farrukh Siddiqui, head of global trade & loan for Middle East and Africa, JP Morgan
  • K Nizardeen, head of trade finance & corporate operations, Emirates Islamic Bank
  • Hailiang Yu, global head of product management, National Bank of Abu Dhabi


Bhandari: Standard & Poor’s announced this morning that banks here and in the wider region are going to face challenges in the general market – and in the trade finance market – in terms of the reduction of growth and consequently customer demand for funding.
From the perspective of trade finance and, in particular, the turmoil that is going on around the region, what is your opinion? Are people feeling very buoyant as far as 2015 is concerned?

Alzarka: The drop in oil prices is a major issue for the entire region. I expect we will see a reduction in growth, and banks will be less aggressive in entering the market because of this anticipated slowdown. We are already seeing a bit of that in Saudi Arabia.

Siddiqui: Clearly, the oil price is a dominant factor especially considering that the US$40-50 average drop in the oil price represents the funds which used to be generated and invested on infrastructure projects in the oil exporting economies and in the region. We are constantly monitoring and analysing the oil price and I don’t think the drop was a surprise to us.

From a trade finance perspective, obviously, lower oil prices will impact liquidity and, most likely, some infrastructure projects. However, the volume of business remains the same, I do not see that there will be any shortfall in traditional trade. People still need to eat and consume as they normally do. In fact we are observing an increased activity in the retail sector with more people in the shopping malls and on the streets; I think the plus point here is that people will have
more disposable income to spend and return back to the economies of the region.

Yu: The oil price will definitely have a big impact on growth and customer demand in this region and we need to look at both sides. If the oil price remains low, it will affect the revenue and spending of oil-related industries and ultimately the governments in this region. As a result, it may slow down some ongoing projects and perhaps decrease the number of new projects to be launched. This could pose challenges on demand and growth. However, a lower oil price may also boost the trade flows as net oil importers could seize the opportunity to stock up. In the meantime, the market uncertainty and slowdown in many economies have spurred demand for more efficient working capital solutions and supply chain finance. We have been focusing on developing those value-added trade solutions for our clients in order to benefit from the good market momentum in this region.

As to the trend of 2015, we haven’t observed any immediate negative impact on the progress of the existing projects in the first quarter; however we need to remain cautious as the oil market fundamentals could get weaker at the end of Q1 or early Q2 and any further decrease in the price could have a big impact on the projects and customer demand. Having said that, I do believe the oil price will gradually come back to the comfort zone of the GCC countries. The only thing that matters to the growth in 2015 is when. Will it be in the second quarter? Will it be in the second half of the year?

Ali: There are two issues. One, from a domestic economy perspective, is the cyclicality issue for the oil price. The oil price is down and that will slow down projects in the UAE – possibly more so in Saudi Arabia and some other places where they have a larger dependence on oil. In Abu Dhabi we have not seen a pullback, but it has to have an effect, because US$50 in 2.5 million barrels a day is a fairly significant number. In terms of the pure domestic consumption of, say, steel, cement or these kinds of commodities, I think that will have an effect.

However, the other thing we are seeing – which I want to open up to the floor – is that there is a structural kind of shift. What we have sensed is that there are a lot companies in different parts of the world with interest in setting themselves up in Dubai particularly and using this as a re-export hub into the region, the region being either the GCC or into Africa. That structural shift has its own positive momentum, for many reasons. That will potentially fill in some
of the drag you are seeing due to oil prices.

If the oil prices start dampening, resulting in real estate pricing going down and office rentals stabilising, the cost of doing business here and the cost for companies who want to relocate into the UAE will also go down – that can only be a positive.


Bhandari: Ziad, viewing the economic environment from the Levant, what are your observations?

Ghosn: In Lebanon and Levant, it is a different ballgame. Obviously, Lebanon is a country that is not negatively affected by the drop in the oil prices, at least in the short run. On the contrary, the overall impact on Lebanon’s economy is expected to be positive with a lower energy bill.
We have different kinds of problems and different kinds of issues. Putting aside the negative news that we hear about the conflict next door and all of the social impact of the flow of millions of refugees into the country, if you look at imports from a trade finance perspective, prior to the crisis in Syria in 2011, Lebanon’s imports were growing at a low, single-digit rate, because the political stability in the country over the last 10 years was not as encouraging compared to the previous decade.

Starting in 2011, total imports have increased by around 12-15%, virtually overnight. The same for consumer goods and foodstuff imports which also witnessed a double-digit rate of growth in 2011, then maintained a steady growth by 5-6% over the subsequent years. The sudden growth in 2011 was mainly because of a significant increase in the local population from 4 million to 5 or 5.5 million, because of the large flow of refugees coming from Syria. If you want to look at this from a positive perspective, this is one of the few positive factors that contributed to counter the general slowdown in the economy over
the past few years.


Bhandari: In terms of the Levant, would you say you are feeling optimistic on what is going on and this population growth will take the economic growth forward?

Ghosn: I would rather look at the drop in oil prices from a remittances flow perspective: these are coming from countries where oil is very important and where the Lebanese expatriate community is working. Lebanon receives, on an annual basis, around US$8bn of remittances. 60% of these remittances come from the GCC. For a local population of 4 million and a GDP of US$44bn, this is quite sizeable and instrumental for Lebanon’s economy and financial stability.
Bhandari: In the Levant, there is going to be growth. S&P is saying something different about the UAE. Is that unrelated or co-related?

Subramanian: It is co-related. There is a lot of relevance in all of these points of view. At the end of the day, my view is simply that oil price reduction translates into a lower standard of living and lower GDP growth. That is not quite the reality, because there is first of all the accumulation of wealth that has been committed to ongoing projects in a horizon of at least 12 months, if not more. The state is a very big provider of GDP growth in the UAE. Consumption is a consequence of people who work for the state, one way or the other. The disposable incomes depend on what the state pays them and the amount of job creation. Job creation has not slowed down. Anecdotally, on the basis of economic evidence, if this continues and oil tanks even further, yes, in 12 months distress will start showing, but not before it becomes very real in some other countries.

The other thing about the UAE is that half its economy is oil. In Saudi Arabia it is a much bigger number – as in Kuwait or Qatar. SMEs, trading and hospitality are all much bigger and diversified businesses, which are further connected with the Levant and other parts of the world. Talking about the domestic UAE economy is not like talking about the Chinese domestic economy. The UAE domestic economy is very dependent on the region and the rest of the globe. I would say that, if S&P is saying that: ‘Rein back some of your lavish habits’, I do not think it is quite intended to warn of some prognosis of what is really going to happen.

I also give enormous credit to the planning that has developed in this region. It is no longer the profligacy of 20 years ago when oil revenues were doing well and they immediately spent the money on luxury goods, which tanked and we did not have enough to manage the projects that were going on. There is enough planning and enough wealth. It is telling that with QE ending in the US and liquidity tightening, the last time liquidity tightened the sovereign wealth funds were asked to contribute and so liquidity was kept afloat. This time, that did not happen. We are seeing Euribor diverge away from Libor, as an indication of what the central banks are prepared to do. I am not quite in agreement with S&P.


Bhandari: Everyone is talking about Dubai as a re-export centre. Will this depression on oil prices affect trade in Dubai going forward?

Sankaran: Dubai is a little bit simpler. I agree with some of what the others are saying. We are coming off a very good 2014. All of us had a good 2014 here, but 2015 is not going to be 2014. I think it is going to be challenging. I think trade finance in Dubai will hold steady, especially in the traditional sectors such as building materials and commodity finance. I am definitely expecting them at least to do well.
80% of Dubai trade is related to the non-oil trade economy. Dubai is nicely placed for re-export, because it is in the Asian and African corridor. It will always benefit from that corridor status. As Murali said, Dubai’s planning is also very good and it has paid off post-crisis in the last few years. Dubai has planned
well and managed well.

In the UAE, of course oil and European sentiments are going to dampen the economy and the spirits.
Bhandari: Is pricing on trade finance going to increase or decrease?

Menon: Clearly there is sound liquidity for banks in the region, in particular Abu Dhabi banks. Credit appetite and liquidity have an impact on net interest margins for funded transactions. Do we see this trend continuing this year? More or less, I think it has plateaued. The UAE is in a strong position within the GCC region to cope with the weak oil price environment given its large foreign exchange reserve position and we continue to see progress on core investments, which will support non-oil activity. The oil sector is expected to contract slightly while economic growth will be driven largely by the diversified non-oil sector with a strong banking sector.

The introduction of the SME law by the UAE government is a testament to supporting the growth in that sector. This year, with global banks pulling out of certain client segments, I think the opportunity is there for local banks to play a role across the board, and in particular the SME business and the large corporate business. Local banks are also growing internationally to capture the business with UAE in east-to-west and south-to-south trade flows.

Nizardeen: The market is optimistic about oil prices bouncing back, if not to the old level, at least to a certain extent. Keeping that in mind, people are not pulling back any projects or investments. From the time oil prices have dropped, volumes have not dropped. I have checked with several banks in the region: the feedback I got was that all the banks are doing well; their volumes have gone up. I think it must be the same with all of you: all of you must have seen that January was a good month compared to previous years. In previous years, you would have seen that January was not that good. We have done extremely well, and most of the banks are doing extremely well.


Bhandari: Is there any particular sector that is doing better than the others?

Nizardeen: Overall, as Manoj said, projects are going on. There is no fallback or curtailing of any projects.

Menon: Local banks are stepping up to support the business needs of Asian corporates engaged in projects in the UAE, Saudi Arabia, Oman and Qatar. They do not have to rely solely on their house bank or global banks to support them.

Nizardeen: From the Islamic banking perspective, as Dubai is aiming to become the Islamic hub: it is ongoing. More and more transactions are taking place with the involvement from all sectors. The Islamic sector is growing, and there are more opportunities there. Players who were not there before have entered the market now. I see tremendous growth.


Bhandari: Is there anything on Islamic trade finance that Noor Bank and Emirates Islamic Bank representatives would like to add?

Ali: I think, at least within the region, the acceptability is there. Islamic banks have a role to play. I would see the market share of the Islamic banks growing rapidly. All of the commercial banks here also offer Islamic products. It is not something that is exclusive to the five or six banks that are purely shariah-compliant. I think the challenge for Islamic banks is to make the offering easier and to make things simpler from a documentation perspective. I think pricing is no longer a challenge. Pricing is very much fairly competitive with the commercial banks, but it is just about making the process simpler and more accessible.
Nizardeen: I even find now that Islamic banks are competing with the conventional banks on service level. Turnaround times are much better.


Bhandari: In terms of this buoyancy, there are a lot of new alternative players coming in to this market. There is a slowdown in Mena, but yet new players are seeing it differently.

Alzarka: Regardless of the slowdown, everyone – from pension funds to insurance companies, to ultra-high-net-worth-individuals – across the region and in Europe is looking for yield, which today can be difficult to access. As such, they are turning to alternative asset classes like trade finance, or other types of lending around safe asset classes, where they can get a better cash return.

And there are more and more institutional investors who want to ‘put their money to work’ – recognising that it is a way to enter the market. Of course, this injects liquidity into the market. Some lenders are better than others – yet our 20-plus years of financing expertise in this area sets us apart.
We have mentioned international banks pulling out – which is definitely true. Local banks are stepping in and filling this gap. They have the liquidity, and are savvier and more sophisticated than they were before. However, there is always a gap between what traditional banks and what specialist lenders can do.

That is really where we, as specialist lenders, try to add value. We can never compete with banks because we do not have their firepower. And banks, if they can do the business for you, will likely charge between 2-5%, depending on who you are. The problem is they can’t always do it for you, which means relying on your equity money – at a cost of 10-20%. We sit somewhere in the middle. We can do what banks are typically unable to do, at a cheaper rate than equity money – at around 6-8%.


Bhandari: In terms of incremental providers, will it be to the benefit of the trade finance client if prices are going to be depressed? Secondly, are the alternative providers going to go into specific segments or industries? How are they going to differentiate themselves?

Alzarka: If we look at the ICC numbers, we are talking about a business that is worth US$36tn. I always like to say that I would be happy with just 0.001% of this market. Everyone is trying to find a niche. The lion’s share of this market is managed by traditional banks. Yet even the 1% left for specialist lenders adds oil to the system: it provides flexibility.

I do not believe it will depress prices, because specialist lenders have less firepower – we rarely, if ever, bid for business as high as what banks can do. Specialist lenders have to do something different, and we certainly add more liquidity and flexibility to the market – benefiting everyone.

Menon: I just want to touch on this. If you look at the UAE, we are at 4% penetration in lending to SMEs and the target is to reach 23%. These alternative providers are coming in with technology solutions to finance receivables. The question is this: what is their appetite? Will they be able to fill this gap and, if so, to what extent?

On the other hand, banks are building up their transaction banking business. Every local bank is investing and growing in transaction banking. They are not just investing in people but in systems and products. E-invoicing and dynamic discounting will all be introduced at some point. Yes, there will be room for all the players to play, including alternative providers and this will depend on credit appetite.

Alzarka: We are seeing a lot of lending platforms emerging. But they occupy a very small part of the market. One such platform established in the last
six months, for instance, has estimated their business to be worth US$40mn, and so far they have only landed US$1mn.

However, I do think banks are becoming more and more sophisticated, and eventually they will use these platforms. This kind of penetration is still in its infancy, in a way, but I believe banks will look into providing this type of service going forward – it helps them reach out to SMEs.

Personally, I am not a believer in platforms. If you want to lend – at any level – you need to see your client face to face and really understand their business and needs. I do not believe you can operate solely behind a screen – not in our business.

Subramanian: In many ways, the SME business, especially the start up SME business, ie 0-3 years, in UAE and especially Dubai is the silicon valley of this region – minus the hazards of start-up. It attracts a lot of people. It attracts a lot of capital; it attracts people who want to service that sector, where the banks are absent. There is a natural gap, and the banks will never fill that vacuum no matter how SME-focused they are. No matter how SME-focused our banks in Dubai are, we will only service the customers who are already bankable and not the start-ups. There are no angel funds; there are no government funds. There
is a shortage of providers.

Yu: Amongst incremental providers, we see profile differentiation for the client needs of a tiered market. There are niche technology innovators; some others are offering innovative services and alternative financing structure/solutions; and there are also plain vanilla factoring houses, etc.

When we look at the tiered market, the large corporates in the top tier tend to have more sophisticated needs. This is still a market where the traditional banks will dominate, due to the larger scale of financing appetite, technology investments and thought leadership required.

In the mid-tier, we have mid-market clients who are running their business and treasury in a more sophisticated way compared with ordinary SMEs. For those clients, the alternative service providers and banks are complementing each other. There is a certain level of competition, but those providers and banks are differentiating themselves as they could add value to clients from different angles such as technology, flexibility of solution, financing appetite and pricing.

When it comes to the SME tier, the client needs are around the availability and cost of financing; they are more sensitive to pricing and in general have less demand for the technology innovation and other sophisticated treasury management solutions. Here the products and trade instruments are highly commoditised and pricing is probably the key driver. We will definitely see much more intense competition amongst those providers and banks.


Bhandari: Why are start-ups not being funded?

Siddiqui: The game changer in this business is the liquidity. Two to three years ago some local banks entered partnerships with international banks. This played a significant role in keeping the trade finance engine moving where the role of the international banks was to provide the market with liquidity.

If you go back to 2008, 2009 or 2010, the situation was totally different. Currently, we are pleased to observe that healthy levels of liquidity are available
and that local banks are more and more actively managing the flows. However, there is still an essential role for the international banks to play. That role is to provide the global expertise and innovative structures which will be of benefit to the entire economy.

The SME sector is facing challenging times in terms of access to credit. Sooner or later, I think there might be some commitment from the state to cater for that industry, which is a big driver for the economy as well.

Baghdadi: I definitely believe that the SME business is better served by local banks. Financial institutions usually have a competitive advantage in their home markets servicing this sector. Outside their home market, financial institutions cannot be the bank for everybody and provide every product, offering financial products and services that leverage their key strengths and competitive advantage.

However, in terms of structuring, foreign banks definitely have a role. If my prediction about shrinking liquidity and increased pricing in this part of the world is true, there will definitely be room to do some of the attractive stuff. Let me give you a quick example. Last month we landed a big facility. This is the American subsidiary of an Indian group, and it was a deal originated in India. Their subsidiary was setting up a new receivables finance programme in the US and the buyers were sitting in different parts of the world. Relationship-wise, this is how a global bank can leverage its key strengths. You have the geographic presence and infrastructure, the interconnectivity, the franchise, the geographic presence, and the legal and jurisdictional view in terms of enforceability of
the receivables as well as processes. This is definitely a place global financial institutions, such as Barclays, can play in.

You just said that for the big boys there is always available funding, but I am expecting that local banks will probably be playing a more significant role in the SME space as opposed to the global corporate space. I am not saying they are not ready, but global financial institutions probably have a competitive edge on the global corporate side and the financial institution side. Structuring receivables financing and structuring commodity trade financing are probably the niches into which global banks have to play aggressively.

Ghosn: We truly believe there is potential in the SME space – maybe more on the middle market enterprises rather than on the small side. However, we truly believe in this sector, especially around trade finance. We are coming from an environment where banks are flushed with liquidity back at home: the loan/deposit ratio is around 35%. In today’s low interest rate environment, banks need to continuously seek new avenues for deploying liquidity. We believe that corporate and SME banking is one of those avenues and the main areas where our bank has the know-how, the willingness and the capability to contribute towards. With the recent expansion of our bank into a DIFC branch, this will give us the opportunity to expand our regional reach in that respect.


Bhandari: Why would you bring it here then? Why not take it to Africa or Turkey?

Ghosn: Our bank does have a presence in Turkey, where we are quite focused and active in SME banking. The UAE is also the right location because you can bridge from, on one side, Africa – I am talking about the trade finance space – and, on the other side, the Levant, extended all the way up to Turkey and maybe, in the future, to Asia. I believe being in DIFC is a great opportunity to grow further and a perfect location to be located in for the trade finance business.

Nizardeen: One reason why banks are not stepping in and supporting SMEs is because banks in this region are not equipped to do warehousing. In the long run, the Islamic banks will take over this particular segment. Islamic banks buy and sell goods with a profit mark-up. They can step into this segment which has more potential for the kind of business they do.


Bhandari: It has never been done before. Why is that?

Nizardeen: The infrastructure was not in place. The Islamic banks, though they are established banks, did not have this kind of infrastructure in place. Now they are looking at hiring people and companies who could run warehouses for them and are looking at the possibility of having their own warehouses as well.
Baghdadi: I believe the historical mistake that has been made so far is that Islamic banks were positioned as banks that are limited to Muslims only. This has put a ceiling on the growth prospects of Islamic banks. To elaborate, from my interactions with global MNCs and clients in different regions across the globe, I am able to sense the level of interest in Islamic products once they’re explained, especially the trade finance products. The structure of products such as murabaha or musharaka is quite appealing to them once especially when the risk aspect is considered. I am more than sure that such products will continue to gain popularity globally and would definitely change the world of trade finance. I am a big fan of Islamic financial products, but I do not think we are marketing them correctly.

Menon: It is the question of what the value add is. Today, if you go to client, they have both options: conventional and Islamic financing, and they will pick and choose based on their requirements. Pricing plays an important part here as well.

Sankaran: I would like to ask the global banks about the African push. How do you innovate in trade finance in Africa? Have you succeeded?
In some of the local banks, we are trying to have our own African push. We are sitting in Dubai and there is an African corridor. We are trying to do it in our own way, but we always partner with you and learn from your innovation. How do you think a local bank should innovate and how have you been innovating?


Bhandari: Middle Eastern banks are keen, but are they doing enough?

Sankaran: No, we are trying to push. We are trying to have our own African push. We are trying different ways and innovations. Sometimes we partner with global banks; sometimes we follow the customer. We use the LC route, too. We are trying different things. However, it has not been a spectacular success in the way we thought: ‘We will just rush into Africa and do big business.’


Bhandari: Why is that the case?

Subramanian: The analogy I will offer is using crutches when you are slowly getting back to good health and then starting to walk on your own. Those crutches are international banks, and they come with risk appetite and distribution capability. Those of us who originate these transactions for our clients and need to conclude them in Africa, or the other way around, may not have that initially or may not have a sufficient solution, but today there are so many solutions available to conclude a transaction on our own that the IRU route or the credit enhancement route are no longer the only answer. There is insurance; there are commodity players.

There are a lot of commodity players who do the equivalent of Islamic banking, but they buy and sell commodities. The Democratic Republic of the Congo for us and most banks here would be a red coloured country with very low country risk and very low bank risk clients. Insurance would have very little value to offer, but commodity companies are very active – and they could match your risk direction with a counter-direction so it becomes self-liquidating. Those solutions are all available to local banks, and that has now come home to roost.

To my very good friends here, I would just provoke them by saying that foreign banks are now playing to keep their own piece of action from local banks, armed with all of these solutions.


Bhandari: With regards to Expo 2020, every company you come across says: ‘Give me trade finance lines because of Expo 2020.’ There is a euphoria around it. Does it make sense?

Yu: Conceptually, the opportunities that Expo 2020 brings to us are potentially more projects and, also, more positive market sentiments. As an example for projects, yesterday we saw the news that Dubai had already identified the consortium to manage the overall delivery of the Dubai World Trade Centre. We can foresee more construction projects, as well as demand for new equipment and additional transport infrastructure.

Expo 2020 has been used as a tool for projection, which also helped bring up market sentiments. Based on the Expo 2020 concept, there is a projection that the total number of visitors per year will increase from 10 million to 20 million. This indicates the demand for more tourism and hospitality facilities, transport capacity and other relevant infrastructures. It has been estimated that Dubai needs to build another 100 five-star hotels according to some sources. There might be a question mark as to whether they will achieve the estimated total number, but there is no doubt that many more new projects will be launched. We have already seen the start of the trend and I believe our trade finance business will benefit from the incremental projects and boosted market sentiments.


Bhandari: Do you feel that Expo 2020 will give the necessary boost to trade finance?

Yu: Yes, it will provide the right boost in a phased manner.


Bhandari: Gentlemen, thank you for your valuable insights and perspective. Any concluding comments?

Yu: I think 2015 will both pose challenges and present us with opportunities. We need to remain cautious about how the year will pan out in light of the changing oil price. In the meantime I am also quite optimistic that the trade finance market will benefit from the opportunities arising from the increasing trade flows in the west-east trade corridor, from the incremental projects and investments, and more importantly from the rapidly developing needs for innovative supply chain finance solutions in this region.

Menon: I completely agree with Hailiang. The projects continue to grow. We see these projects, especially on the infrastructure and the construction side. We also see activity in terms of south-south trade with UAE being the trade hub. That is where local banks have started to build up appetite – especially with Africa. How do we look to finance that? I think that is going to be the key focus next year.
Bhandari: Trade finance is going to benefit from that, I hope.

Menon: Absolutely, yes.

Sankaran: 2015 will remain challenging. It is not going to be easy. However, from a trade finance point of view, I think we will hold on to our traditional portfolio, but, in terms of opportunities, we will look more and more at non traditional structures and products. There will be a little bit of deviation. NIMS are under pressure, so we will focus more on fee income products and use those kinds of strategies.

Subramanian: I will strike a different note. I think the big risk, the big elephant in the room, is the financial infrastructure the region can provide. The GCC and the wider Middle East is sitting on US$1tn of infrastructure projects. When Basel III comes and you are talking about managed funding, there is no way you can arrange US$1tn of funding from bilateral bank lines or any of the known forms of finance this region offers. That then brings into question the availability of financial markets catering to projects in this region, because when you go list yourself outside or you arrange for market financing elsewhere, this region is not as well understood as it should be. The big challenge is not S&P and oil prices; the big challenge is the urgency of setting up financial infrastructure.


Bhandari: Do you feel that can or cannot happen?

Subramanian: Obviously, I am optimistic. I am not here to say it is a losing cause, but there is a window – and we are starting to hear the noise of the shutter coming down.

Siddiqui: Let us stay optimistic. I genuinely think the challenge of 2015 is pricing compression, which is not different from what we observed in 2014. Another challenge will be the client selection criteria which local banks will face which will be of increasing importance.

Alzarka: This is the third time that I have participated in this roundtable, and I think the only constant I hear is change. The market is always changing: I hear a lot about the big banks moving out, local banks coming in, and constant innovation. And in such an environment, only the fittest will survive.

For small players, like Falcon, the key is being innovative, nimble and more adaptable. Even the biggest banks are now looking into innovation, and how to better serve their clients. It is all about being a step ahead, and we have the advantage of being a smaller ship – which is easier to steer.

Baghdadi: I would say that we have to watch the landscape very carefully. I think geopolitical tension is important. We have to watch Ukraine, the Iranian nuclear programme, Syria, the Islamic State and see how they are all going to evolve. All of that has a definite impact on the region. I would also like to see what will happen with the liquidity in the financial institutions market. What will be the impact on pricing? Despite being optimistic, I am not as extremely optimistic as I used to be. We will have to watch commodity prices in addition to the price of bank funding given the continuous downgrades of some countries as well as the majority of western banks. It is going be a challenging year; I agree with you.

Nizardeen: 2015 looks challenging. Whoever comes out with innovative products to mitigate these risks will definitely benefit.

Ali: I think we are all optimists by nature, because we are all in the business of doing business and making money. I hope we are not underestimating the risks. There are two risks. One is oil, clearly. That is a big one. The other is the geopolitical environment.

The UAE remains an oasis of calm in increasingly turbulent waters. There are a lot of issues around it. Let us hope that does come to UAE. I sometimes
think of back in 2007/08, when in early 2008 the whole world was going to the dogs. Everybody said: ‘The UAE is different.’ It was not. Six months later, things caught up in a very big way.Yes, I am optimistic, but I am cautiously optimistic. I still remember 2008. At a similar time, in February 2008, we were all sitting here saying: ‘Nothing is going to happen here.’

Ghosn: I am optimistic. Again, it is relative. Given the low growth rate back in the Levant, over here it is definitely optimistic. There will be a challenge in 2015 on the oil side and on the regional geopolitical side as well. However, I do think within the US$50-60 range for oil prices things are still going to be okay. I do think liquidity is going to be important around trade finance. On the pricing side, in the medium term, perhaps Basel III and other regulatory issues will help pricing not to drop the way it dropped before – although the competition will prevail.