The Central Bank of the UAE (CBUAE) has issued a new regulation covering licensing, prudential and conduct requirements for specialised banks. Specialised banks are licensed under the CBUAE’s new regulation and are allowed to practice different financial activities to serve the local community, such as account opening, card issuance, and retail and wholesale lending. Specialised banks are permitted to provide services to UAE nationals and UAE residents only.

The objective of the new regulation is to provide a regulatory framework in which specialised banks can operate in the UAE financial sector in a robust and prudent manner.

Specialised banks are allowed to conduct their activities in the UAE Dirhams only and operate according to a low credit risk model. They can be established either as a conventional specialised bank without Islamic windows, or as an Islamic specialised bank.

The regulation sets a minimum paid-up capital requirement of Dhs300 million that specialised banks must maintain and a risk-based capital adequacy requirement that they should continuously adhere to. It also sets the total consolidated assets of specialised banks which shouldn’t exceed Dhs25 billion.

The CBUAE stresses the importance of specialised banks’ compliance with all regulations, standards, and notices issued for the banking sector, except where there are specific provisions contained in the new regulation which apply to specialised banks only.

The new regulation has been published in the Official Gazette on 31 March 2021 and came into effect on 30 April 2021.

The Board of Directors of the Central Bank of the UAE (CBUAE) held recently a regular meeting at Qasr Al Watan, chaired by Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister, Minister of Presidential Affairs and Chairman of the Board of Directors (BoD) of the Central Bank.

The meeting, which was attended by Abdulrahman Saleh Al Saleh, Vice Chairman of the Board of Directors and Governor of the Central Bank, along with the board’s members, discussed several issues listed on its agenda, most notably a document presented by the Banking Supervision and Examination Department that included suggestions on the financial policies and activities related to the licencing of financial institutions, as well as a document on the enforcement measures against facilities that violate the Central Bank’s policies and instructions. The CBUAE also approved various requests from national banks and financial institutions and issues a licence to establish a specialist bank operating according to a low-risk system. The meeting’s participants reviewed the bank’s Targeted Economic Support Scheme (TESS) and its role in mitigating the financial and economic repercussions of the coronavirus (COVID-19) pandemic.

The meeting also issued a decision to extend the Dhs50 billion ZERO cost funding support facility provided to banks and financial companies until the end of 2021. The members of the board then approved the third and latest issuance of the country’s banknotes, in line with the preparations for the “Year of the 50th.”

The new banknotes will have security marks that meet international standards. Earlier the Central Bank of the UAE (CBUAE) has announced the issuance of a Small to Medium Sized Enterprises (SMEs) Market Conduct Regulation to promote best practices among licensed financial institutions (LFIs) when engaging with SMEs.

The objective of the regulation is to enhance SMEs’ access to financial products and services. CBUAE’s introduction of this regulation follows the launch of its new Financial Consumer Protection Regulatory Framework. The regulation advances the CBUAE regulatory agenda by setting standards of market conduct of LFIs; strengthens governance over the design, promotion and sale of financial products and services, and promotes responsible financing practices. In addition, it provides SMEs with access to timely and accurate information to make informed decisions, implements clear mechanisms for redress of complaints by SMEs, and requires appropriate debt counseling. Furthermore, LFIs are required to ensure that the opening of a bank account for an SME should be completed within three business days, provided that LFIs undertake appropriate due diligence related to financial crime compliance and that SME presents a low risk of money laundering or terrorism financing. The regulation also requires LFIs to establish an independent and effective complaints management function to ensure fairness, transparency, and neutrality in resolving complaints.

WAM