" TITLE: LIBERALIZATION OFBANKING SECTOR – ANEXAMINATION OF THEUNITED ARAB EMIRATES’BANKING SECTOR IN THELIGHT OF WORLD TRADEORGANIZATION PRINCIPLE Submitted by :ABSTRACTLiberalization to some means another kind of privatization and to some it means diluting the1 control of Reserve Bank or the Finance Ministry . Liberalization in banking sector meanschanging the banking policies by equating them with the reform processes of freeing prizes,entry from other states and trade and above all expands the scope of foreign investments in to thenation to develop the economical condition of the nation. In the current era it is observed thatNations globally have taken steps to liberalize the financial sector of their economy. One of suchmajor move is liberalization of the banking sector. The major aim of the dissertation is not todiscuss in detail the concept of liberalization or its pros and cons, as numerous researchers havesecured this part of the subject. Instead, it is concerned with understanding the scope ofliberalization and its major impact on the federation of seven small American Gulf emirates, theUnited Arab Emirates (UAE). The principle aim of this dissertation is to give the readers a betteridea on how the policy of liberalization has made a greater impact on the economy of the UAEand opened the trade market of the UAE to the global world. Additionally, the dissertation alsodiscusses in detail the impact of the UAE?s major decision to become the member of the WorldTrade Organization (WTO) in achieving liberalization of banking services for its membercountries. The dissertation further analyze banking sector in the UAE and the extent to whichliberalization has been possible after accession to the WTO. The dissertation discusses theHistory of the Banking Sector in the UAE, including a brief outline of the banking sector until1996 and the legal framework. In as second step it analyses the legal regulations of the bankingsector in the UAE such as the Federal Law No. 10 of 1980 on the Central Bank, and theMonetary System and the Organization of Banking (the Banking Law), the UAE Federal LawNo. 18 of 1993, as amended (the Commercial Code), the UAE Federal Law No. 6 of 1985 on1“Liberaization,” Chapter II, http://shodhganga.inflibnet.ac.in/bitstream/10603/701/8/08_chapter2.pdfIslamic banks, financial establishments and investment companies (Islamic Banking Law) andthe various circulars, notices and resolutions the UAE Central Bank issues from time to time o2 improve banking standards in the UAE. Finally the thesis examines the liberalization ofBanking Sector and the UAE?s accession to the WTO, with discussion on the provisions in theWTO for liberalization, obligations specified under the General Agreement on Trade Services(GATS), the GATS instruments to liberalize banking sector and principle of access to markets- provisions, restrictions and shortcomings; and finally the thesis concludes with the finding of theInternational Monetary Fund assessment reports on how effectively the financial economy of theUAE imbibed liberalization and how effectively it is thriving to overcome the drawbacks ofliberalization.ContentsABSTRACT ...................................................................................................................................................... 1ABBREVIATIONs ............................................................................................................................................ 4INTRODUCTION ............................................................................................................................................. 5LITERARY REVIEW AND ANALYSIS ON LIBERALIZATION ................................................................................ 8METHODOLOGY: ......................................................................................................................................... 13HISTORY OF BANKING SECTOR IN THE UAE ................................................................................................ 15LEGAL REGULATIONS OF THE BANKING SECTOR IN UAE ............................................................................ 18Liberalization of Banking Sector and UAE’s accession to the WTO ............................................................ 22THE PROVISIONS IN THE WTO FOR LIBERALIZATION .............................................................................. 23GATS INSTRUMENTS TO LIBERALIZE BANKING SECTOR ......................................................................... 24GATS - Overview ..................................................................................................................................... 25Obligations under the GATS .................................................................................................................... 27LIBERALIZATION OF SERVICES UNDER THE GATS ....................................................................................... 36PRINCIPLE OF ACCESS TO MARKETS-PROVISIONS, RESTRICTIONS AND SHORTCOMINGS-.................... 432Ahmed Bashir and Shah Aly, “Banking Regulations,” 2011; http://www.afridi-angell.com/items/limg/bankingregulation20112.pdfNATIONAL TREATMENT PRINCIPLE - GOVERNMENT OJECTIVES, OBLIGATIONS SPECIFIED FOR THE UAEBANKING SECTOR, REGULATIONS AND NATIONAL POLICY - EXTENT TO WHICH IT HAS BEENIMPLEMENTED ........................................................................................................................................ 47ARGUMENTS IN FAVOUR AND OPPOSING LIBERALIZATION OF FINANCIAL SECTOR ......................... 49RECOMMENDATIONS ............................................................................................................................. 51CONCLUSION ............................................................................................................................................... 55BIBLIOGRAPHY: ........................................................................................................................................... 58ABBREVIATIONsGATS: General Agreement on Trade in ServicesUAE: United Arab EmiratesU.S.A: United States of AmericaWTO: World Trade OrganizationFSAP: Financial Sector Assessment Program GATT: General Agreement on Tariffs and TradeSCA: Emirates Securities and Commodities AuthorityIAS: International Accounting StandardsGCC: Gulf Cooperation CouncilGAFTA: Greater-Arab Free Trade AreaMTS: Multilateral Trading SystemMFN: Most-favored NationsCBU: Central Bank of United Arab Emirates INTRODUCTION3 Liberalization will bring in a greater change in the banks. It will improve the working standardsof the banks by increasing intense competition among banks, both domestic and foreign. Theincreasing competition also squeezes profitability and forces banks to work more efficiently.This intense competition has a positive outcome such as greater choice available for thecustomers, increase in the use of greater and sophisticated technology in the banks which in turnincrease the disclosure and transparency in the bank?s balance sheet.The banking sector in the UAE is fragmented. There exist a total of 46 domestic and foreignbanks operating in this region. Being the most protective service sector, the banking sector has4 geared up to meet the global challenges by adopting the Basel II banking standards . The Basel IIInternational banking protocol was implemented to improve the overall banking performance inthe UAE by improving the capital accord, creating powerful risk management departments in the5 banks, among other matters. Banking liberalization has long been felt as the cornerstone of theUAE economy, the realization of which has lead to the progressive opening up of financial sectoramong the member countries. In the wake of its accession to the WTO on 10th April 1996 andthe subsequent commitments to the General Agreement on Trade Services (GATS) under theWTO umbrella, there was a universal decision among the UAE countries to liberate the marketsespecially the Banking and financial sector. Such decision was in line with Article 3 of theGATT that makes provision for the principle of “national treatment” as the one that gives others6 the same treatment as one?s own nationals.The UAE joined hands with the WTO with the3Dr. Rettab Belaid, Fakhr Tarek Abu, and Dr. Istaitieh Abdulaziz, “Implications of FTA on UAE Banks: An Explorative Assessment,” PolicyStudy, Data Management and Research Department, 20064Berument Hankan and Ersel Hansan, “Liberalization of Banking Services,” http://berument.bilkent.edu.tr/ST7.pdf 5Hashmi Anaam, “An Analysis Of The United Arab Emirates Banking Sector,” International Business & Economics Research Journal – January2007, Volume 6, Number 16'WTO | Understanding The WTO - Principles Of The Trading System' (Wto.org, 2017)<https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm> "