(Bloomberg) -- First Abu Dhabi Bank PJSC proposed removing a cap on the foreign ownership limit in its sharers after the United Arab Emirates started loosening rules to attract international investors.

The board’s proposal is subject to the supervision of regulatory authorities and would require amendments to the current laws and policies, the nation’s biggest bank said in a statement. The move has "the potential that other public companies in the U.A.E. may apply similar measures," it said.

This “is positive news for U.A.E banks as it may allow international banks to take strategic stakes in local lenders, especially for the mid to small sized lenders that are underperforming,” Edmond Christou, a financials analyst with Bloomberg Intelligence, said by email. “This is likely to bring new skills, speed up digital transformation with knowledge sharing and international investments.”

The U.A.E. said this month it’ll allow foreigners to own 100% of businesses across industries. The federal government will leave it to individual emirates to “decide the ownership percentage in each activity according to their circumstances,” said Prime Minister Sheikh Mohammed Bin Rashid Al Maktoum.

The U.A.E., the second-biggest Arab economy, currently caps foreign ownership of businesses at 49%, except in so-called economic free zones. First Abu Dhabi Bank’s shareholders in February approved raising its foreign ownership limit to 40% from 25%.

First Abu Dhabi Bank’s proposal comes after the market regulator in neighboring Saudi Arabia removed the limit of ownership of publicly traded companies for foreign strategic investors. While the Saudi market watchdog has removed the cap, limits by other regulators or a company’s own rules still apply.

First Abu Dhabi Bank in May asked MSCI Inc. to clarify its decision not to increase the lender’s weighting on its MSCI EM index. The index compiler’s CEO said in an interview in March that a strategic stake controlled by Abu Dhabi’s royal family was an obstacle for higher weighting.

FAB shares closed unchanged on Wednesday. They’ve risen 6.4% so far this year, compared with a 3.4% gain in the exchange’s benchmark index.

  • The bank also reported second-quarter profit on Wednesday that topped analysts estimates. Click here for more

(Updates with analyst comment in the third paragraph.)

--With assistance from Filipe Pacheco.

To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

To contact the editors responsible for this story: Claudia Maedler at cmaedler@bloomberg.net, Shaji Mathew

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