With an outstanding visionary leadership, and an understanding of the market's risks both on national and international levels, combined with an increasing pressure from international business community to open the local markets to the international banking giants for competition, a directive by His Highness Sheikh Mohammed Bin Rashid Al Maktoum to create a banking giant that can compete in the local market after opening up for the international heavy players, and this was in 2007.
His vision was as his highness put it:
"The integration of two of the UAE's firmly established and best-known financial institutions will create a UAE champion and a regional leader. This merger reinforces Dubai's position as a world class financial centre."
Both Emirates Bank International and National Bank of Dubai were Public Traded Entities with Emirates Bank International (EBI) shares mostly owned by Dubai Govt. (due to many set backs in its history, while National Bank of Dubai (NBD) shares have less government shares in.
This if it was implemented in the right way, would really have had the giant champion adding the best experiences and practices of both entities into the new organization, but what the leadership wanted didn't happen when the steps of the real merger process took place, instead of delivering a successful merger, EBI management, having their EBI shares mostly owned by the govt. took the lead and changed the merger into a very ugly take over.
Emirates NBD, the new company had to adopt all of the EBI's policies and procedures and nothing from NBD's policies, procedures, practices, experiences, customer relations was taken in consideration in the new company.
The giant which was supposed to lead the country's economy in hard times, was a burden on the country's economy dragging it even further down by receiving billions in funds from Central Bank in a shape of a second capital.
NBD was mainly known to be a Relationship Banking, treating its customers on a portfolio basis, understanding each of its customer's financial status and building on it to generate a healthy mutual benefit for both the bank and the client.
EBI at its side was mainly known to be a Transactional Banking, concentrating on each transaction the client has as a single and one time process and not caring much about the client's portfolio, each transaction had to be beneficial for the bank before considering the client's interest; thus resulting in customers leaving it to other financial houses they feel more value when dealing with. Such banking system as it tends to secure the bank's interest till the max without taking an extra step towards its clients leads to cases such as the case where a prominent UAE local businessman had his check for AED 3,600/- only due to lack of funds (missing 400 Dirhams) in the account the check was issued from while in total in his 3 other personal accounts including a fixed deposit he had more than 35 Million Dirhams..! driving this same client to withdraw all his balances and exit the relation to a bank that respects his business and interest.
The result, when the take over, merger supposed to be, was in action, the first decisions by the new management was to eliminate most of the prominent NBD's management team to pave the way for unilateral instructions to be processed without objection, hence, most of the board members of ex-NBD, and almost 90% of its management were forced to exit the organization.
In a phase of 2 years time, all management team whom came from ex-NBD were asked to resign, given what the EBI management call it: An Option to Resign, where they were handled two ready printed letters, one was a Termination Letter already signed by the reporting manager, and the other was a Resignation already printed and approved also by the reporting manager..!
By such process, the shock wave which came from top to down affected all customer facing and operational management and procedure, as one of the ex-EBI top managers called it privately 'A Successful Cleansing Takeover', and therefore, a banking operating system which was already bought by EBI before the merger and called Finnacle was chosen to be the main system to be used, this same system, EBI paid few million Dirhams to buy from an Indian based company, and with least modifications instead of having a tailored system that will carry on the exact requirements of the banking needs and culture of the hosting country, UAE.
This system, described by most of the users as a non-user friendly system takes too much resources and required an upgrade of many of the existing machines already running, wasting more and more of much needed monies in the very bad timing, not mentioning the extensive time that it required to train the staff how to use it and which took almost 2 years to launch, adding to the expenses of the banks increasing spending practice, where inefficient equipment, tools and furniture were bought with high prices with no justification given a hidden indication that someone must have being benefiting from such purchases..!
Furthermore, a rewarding payment system where certain people receive much more than their colleagues without much efforts put by EBI was kept intact, making one staff for example in 2008 in a branch based in Deira, receive more than AED 600k in commissions for just opening few accounts for customers assigned to his portfolio by default, and his reporting management line receiving percentages while most of the other branch staff of 16 members receiving in total just less than AED 150k, and having to serve this customer's transactions through his Relationship Officer..! Commissions are calculated based on each transaction the customer perform on his account that generates profit, for example, remittance and foreign exchange.
In an unprecedented move, the new bank once in 2009 paid a quarterly commission to customer service staff and then withdrawing it back, even to the extent of overdrawing the staff accounts whom already spent that commission to force them repay it, as overdrawn accounts even for staff bear an OD interest rate up to 19% p.a.
Ex-NBD staff members forced to resign (option to resign..!) were dealt with a very unprofessional manner, changing their staff accounts to customer accounts and hence increasing their lending interest rate from EIBOR (approx 3%) to a height of 10.5% on balances of personal loans, holding their passports till they can secure a guarantee or cancel their visas, depriving them from their basic rights to travel and try their careers in other countries, as the ENBD was not assisting even in references.
Most of NBD's customers database was introduced through NBD's own managers and staff whom were sacked by the new company's management (option to resign..!), therefore, almost all of these customers found themselves without their relationship account officers and managers, and even were not given support through the merger (takeover) process and not even after, forcing them to move their balances to other banks in the same country and even offshore, where they felt value for their relation. This has caused customers to withdraw balances of hundreds of millions from their accounts just due to poor quality service, they were never used to when dealing with ex-NBD.
Audit itself has become a burden on staff of the organization Emirates NBD, due to lack of trust between management and staff of ex-EBI, which has been extended to ex-NBD branches, now, audit is being conducted at branch level in two forms, one is a comprehensive detailed audit that covers each and every task at the branch or the department concerned and it exhausts all efforts and time of the staff and is conducted almost every one month, and the other type is a less difficult but still tiring as it's conducted every two weeks once, this type of auditing has had its setback as staff feels all the time under pressure, and even if a branch has the least number of errors it's still being monitored at the same frequency and focus as the one with many errors..! Staff complaining of lack of trust between management and them, having in mind that with all these audits still so many frauds and wrong doings are found, which brings us back to the quality of the staff chosen and the system and work flow used.
More to come as we study case this merger so future banking professionals can benefit from the lessons learned here. No tribes or favoring should be involved in a financial transaction, especially at such scale.
In general, most of ex-NBD clients has migrated away from the bank, most of ex-NBD staff and especially the best experienced with their customers left the organization due to the quality of service, products, management and procedures, the strange thing is how come Dubai Govt, with its extensive monitoring system over financial institutions didn't yet get itself involved in checking what's happening inside its huge investment in the 'champion' bank.
Information discussed above were stated by an ex senior manager of NBD who was asked to leave (given the option to resign) at the beginning of the merger process back in 2008.
