Dubai: Standard Chartered is looking to sell or wind down some part of its business in the UAE, according to banking industry sources.
The bank is looking to either sell or exit some of its small and medium enterprises (SME) business in the country, said a source.
“The bank is considering two options, one it to wind down some of these accounts or sell it to potential buyers,” said another source.
Standard Chartered, last week agreed to pay a $300 million fine following sanctions from US authorities. The New York Department of Financial Services (DFS) said the UK bank’s internal compliance systems had failed to detect or act on a large number of “potentially high-risk transactions” mostly originating from Hong Kong and the UAE.
The department did not give any information on the nature of the transactions. In a settlement agreed with the bank, DFS ordered Standard Chartered to halt dollar-clearing operations for unnamed high-risk retail business clients of its Hong Kong unit.
The bank is already in the process of cutting business with high-risk clients in UAE, but will also not be able to process dollar funds through the United States for them.
Nearly 8,000 accounts are reportedly affected by the settlement with the US authorities. Last week the UAE Central Bank said the closure of accounts in the UAE due to the settlement with US authorities could attract legal liabilities for Standard Chartered in the UAE.
As part of the settlement, the bank has 90 days to exit the affected accounts. Following the settlement in the US, the bank has been reassuring its customers that their accounts will not be impacted.
With the wholesale banking business constituting about two-thirds of its balance sheet, the bank said it will remain focused on relatively large corporate clients. Sources said while the bank is likely to re-categorise some of its SME business, while a part of the portfolio will be offered for sale or a wind-down.
Although the banking sector in the UAE is flush with liquidity and a number of local banks have been competing to acquire SME assets, it is not clear if any bank has shown interest in Standard Chartered’s SME portfolio.
“Many local banks are in the process of reviewing their SME portfolios after going through a period of rapid expansion during the past few years. The compliance issues linked to some of these accounts will be a concern for potential buyers,” said retail banking head of a local bank.
For the first half of this year Standard Chartered’s income from the UAE, which generates more than half of the income in this region, was down $35 million, or 6 per cent, to $596 million. The bank attributed relatively low growth in lending, trade finance and slowdown in financial markets to its bank’s lower profitability in the UAE.
