Abu Dhabi Islamic Bank, the emirate's largest Sharia-compliant lender, has hailed efforts by the central bank to clamp down on unscrupulous sales of investment plans to UAE expats, saying the reputation of the industry as a whole had been damaged by dishonest brokers.
"More regulation is a good thing and we work very closely with the central bank" and other wealth management institutions who wish to improve their services, said Daffer Luqman, head of wealth management at ADIB. "At the end of the day the reputation of the business affects everybody.
"If an institution does a bad job of promoting or marketing a service it affects the whole industry so it's very important that this business is regulated, that it's regulated effectively and that everybody plays by the rules."
The Central Bank of the UAE issued a circular in May advising banks and finance companies to resolve all outstanding mis-selling complaints "amicably" and within a deadline of just 90 days. It issued the circular in response to "an increasing number of complaints in relation to the savings and investment insurance/takaful products". The mis-selling complaints all have a common theme, with customers sold policies that are "complex in nature and are not well understood", according to the circular.
These contractual and fixed-term savings or investment plans have been created by the largest global insurance companies and have been criticised by experts as one of the most expensive financial products available anywhere in the world. These plans have not been licensed to be sold to consumers for many years now in countries like the United Kingdom.
In the circular, banks and finance companies were criticised for using inadequately trained staff to sell policies.
Banks that already have permission to market life insurance and general insurance products can continue only where the employee has the requisite qualification and uses a system to assess the suitability of products for customers.
"I think the failure has been in not explaining to the customer well enough the structure of these products and how they operate," Mr Luqman said.
"But if we have regulation, more effective regulation, it will be good for the future of the industry. This is also why we've been very good to ensure we have regular education awareness for our clients to continually remind them of the structure of these products, how they operate and how they fit in their portfolio."
Abu Dhabi Islamic Bank praises UAE Central Bank clampdown on mis-selling investments
Central Bank issued a circular in May about mis-selling of investments
Most popular today
