"banking law, banks do not have the authority to charge a rate of interest that is fixed on depositsand loans. The foundation of the Islamic banks is variable interest rates that are based on theprofit/loss sharing.While the Central Bank is the banking regulatory authority in the UAE it is also subject toadditional registration and licensing requirements at both the federal and the emirates levels. TheFederal Companies Law also regulates and monitors all the commercial companies that havebeen incorporated in the UAE and the foreign companies that have established their branches inthe UAE.Additionally, the various circulars, notices and resolution issued by the Central Bank board ofgovernors deal with a variety of aspects of banking such as bank account, for capital adequacynorms, for maintaining the required reserve ratio, and reporting other financial requirements tothe Central Bank.It is essential that all the commercial banks that have been incorporated in the UAE areestablished as public shareholding companies under the UAE company law and the majority isowned by the UAE nationals that is majority of directors of such companies must be the UAEnationals. While the shareholding percentage for monetary intermediaries and investmentcompanies is 51%, for commercial banks, financing companies and investment banks it is 60%.Although it is mandate that the foreign banks are required to appoint a UAE national as itsnational agent, these banks are not required to have an agent.In addition, to these regulations the other regulations include the Emirates Securities andCommodities Authority (SCA), that regulates the securities market in the UAE. In the UAE allthe banks are listed on one of the two onshore markets lists: the Abu Dhabi Exchange and the Dubai Finance Market. The SCA issued the Investment Fund Regulation in July 2013 thattransferred regulatory responsibility for the licensing and marketing of investment fund andnumber of related activities from the Central Bank to the SCA. One of the important development of the UAE?s banking sector is the creation of the DubaiInternational Financial Corporation (DIFC) which is based on an offshore model and hencedoes not restrict of control the financial sector. The creation of the DIFC has helped the foreignbanks to overcome restrictions and enjoy 100% ownership on capital repatriation and zero taxrate.The US Foreign Account Tax Compliance Act, an agreement entered between the UAE and theUS and certain prudential regulations including risk-based capital adequacy rules, are certain35 other legal regulations governing the UAE banking and financial sector.After a brief understanding of the UAE banking sector and its regulation, the dissertationcontinues to analyze the impact of liberalization on these banks. In addition to the liberalizationthe next sections also provide brief understanding of the GATS obligations and its impact on theUAE banking sector.Liberalization of Banking Sector and UAE’s accession to the WTOBanking liberalization has long been felt as the keystone of the UAE economy, the realization ofwhich can lead to the progressive opening up of financial sector among the member countries. Inthe wake of its accession to the WTO on 10th April 1996 and the subsequent commitments to theGATS under the WTO umbrella, there was a universal decision among the UAE countries toliberate the markets especially the Banking and financial sector. Such decision was in line with35Putnis Jane, “The Banking Regulation Review,” Edition 6, 2015 Article 3 of the GATT that makes provision for the principle of “national treatment” as the onethat gives others the same treatment as one?s own nationals.By allowing the foreign players toset up banks in UAE, private policy initiatives are channelized through proper incentive structureand regulations, and thereby aim to reduce dependency on the government spending andexchequer.In pursuance with the WTO membership banking liberalization was seen in a newlight in order to improve financial development and achieve economic growth. Increasedefficiency of banks, improvisation in credit allocation, elimination of control on interest rateswas some of the steps through which deregulation seemed possible.While the novel idea behind the liberalization of the banking sector has been appreciated by themember countries, the progressive application of the GATS agreement has faced a setback owingto a number of reasons ranging from Central Bank Clearance to restrictions on the license topermit entry of foreign banks. This report analyses the extent to which the liberalization of bankshave been possible in the UAE, post its accession to the WTO, the road blocks along the way as36 well as the road ahead in providing market access to foreign investors and foreign banks.THE PROVISIONS IN THE WTO FOR LIBERALIZATIONOfficially commenced on January 1, 1995, the WTO is that organization which was formed withthe objective to supervise and liberalize the international trade. It was created by the UruguayRound Negotiation that took place in 1986 through 1994. The WTO restates some of theobjectives of the GATT such as promoting trade flows by encouraging the nations to implementtrade policies that are unbiased and predictable; raising the economical standards of the nationand introducing significant development. The principles of WTO include transparency, MFN36Same as Note 6 treatment, national treatment, free trade principle, trade system based on rules and principle of37 free trade.The main objectives of the UAE to join the WTO in 1996 are to increase the UAE?s participationin the multilateral trading system; enhance the trade relations worldwide and to benefit from theopportunities that the WTO and the MTS offer. Further, the trade policies of the UAE are similarto the principles of the WTO including using the approach of open economy, maintain a liberal38 trading policy, maintaining a fair competition and are depended upon the factors of the market.GATS INSTRUMENTS TO LIBERALIZE BANKING SECTORThe GATS is that agreement that at the international level that regulates and liberalizesinvestment of the financial service providers in addition to trade in financial services. Asdiscussed further GATS along with GATT was the result of the Uruguay Round. It is part of theWTO including the WTO?s dispute settlement structures and decision-making. Liberalization ofa financial service and the banking service also deals with the many bilateral and regionalagreements. The GATS principles are applicable to the financial sector and additionally, theGATS agreement has special instruments that relate only with the financial sector.The current section provides overview of GATS, obligations of the GATS and also includesanalysis of the risks associated with the financial service liberalization and the GATS rules incurdue to financial and economic instability and wider issues of the society faced by the developingnations and the UAE in particular. However, most of these issues have no where been discussedin the GATS negotiations and the Western financial negotiators have brushed aside these issues.37Pandey Rewa and Singh Rajnandinani, “World Trade Organization,” 2012; https://www.slideshare.net/mamta_90/wto-presentation 38Al Naseebi Saeed Suwaid, “WTO Negotiation in Services – Perspective and Experience of United Arab Emirates,” United Arab EmiratesMinistry of Economy and Planning The GATS agreements have a different set of instruments while dealing with the concept ofliberalization especially in the financial sector because the financial sector also includes foreigninvestments by the foreign financial firms. Additionally, the WTO members who are undertakingthe liberalization commitments under the GATS have the advantage of additional security ofbeing assured of the policy thrusts and policy stability of the host country. This additionalsecurity encourages the flow of foreign investment by decreasing the foreign capital attractionsand offers a variety of fiscal incentives.GATS - OverviewOne of the vital agreements under the WTO?s legal framework and significant outcome of theUruguay Round of Multilateral Trade Negotiations is the GATS. It is also one of the principles39 that cover the International Trade in Services along with GATT. After the Uruguay Roundfailure and after an interim agreement in July 1995, the financial services negotiations from theperspective of the GATS were included finally in December 1997. The largest service sectorssuch as the financial service, banking and insurance were now completely subject to the multitrade rule. This agreement not only consolidated the fairly open policies of the industrial nationsthat account for most of the international trade finance service but also from both the countries in40 transition and the developing nations.The main purpose of the GATS is to secure the levels of liberalization that have beenprogressively higher over past two decades. Being on the International Trade Agreements theGATS administer these levels of liberalization through successive rounds of negotiations that39Dr. Lanoszka Anna, “THE GATS: A REVIEW OF ITS MAIN PROVISIONS”;http://siteresources.worldbank.org/INTRANETTRADE/Resources/Pubs/303936-1277762728714/7205257-1277763398502/GATS.pdf40Mattoo Aaditya, “Financial Services and the WTO: Liberalization Commitments of the Developing and Transition Economies,” 1998;http://siteresources.worldbank.org/INTRANETTRADE/Resources/MattooFinServ.pdf"