The United Arab Emirates (UAE) is poised to establish itself as a main regional financial services center.4 Saudi Arabia has also seen a growth in financial activities and is establishing itself successfully among regional and global financial markets.5 As major financial centers in the Middle East, change and progress in the UAE and Saudi Arabia could arguably pave the way for effective and efficient financial services regulatory reform in the Middle East generally. However, whether or not these trajectories will continue in the UAE and Saudi Arabia will depend on the transparency and strength of the financial services framework in these two Middle Eastern destinations. Much will also depend on continued innovation and improvements in the business environment as well as market competition and access. In other words, regulating the financial services industry in the UAE and Saudi Arabia is important for the economic growth and development in the Middle East. The purpose of this research study is therefore to provide a critical appraisal of both the developments and constraints of financial regulations in the Saudi Arabia and the UAE.
Credit expansion and growth in the Middle East and North Africa in general has been slow as a result of a repressed private sector and a lack of major financial crises. More importantly, financial regulations have tended to favor excessively taking precautions against risks. The result is, global credit growth in the Middle East has been middle, lower risk and “less volatile” compared to other emerging markets.6 In this regard, the extent to which financial regulations are effective will rebound to economic growth and development.
Financial regulation refer to a set of rules often promulgated by government or government bodies dictating what financial institutions can do and how they can do permissible acts. Financial regulations often apply to brokers, banks