UAE President issues law on Central Bank, financial institutions

UAE President His Highness Sheikh Mohamed bin Zayed Al Nahyan has issued a federal decree-law on the Central Bank, and the regulation of financial institutions and insurance activities.

The law will see the Central Bank with more powers, stepping in to impose and recover funds from violating parties.

It can impose a proportional fine not exceeding ten times the value of the violation or "unjust enrichment". The imposed fines shall be automatically debited from accounts of the violating person, held with the Central Bank or with any licenced financial institution.

The Central Bank can also settle with the individual before a final judicial decision is made, and publish the details of the settlement on its official website to enhance market transparency and discipline.

It will also function as a “Resolution Authority” with the power to remove and appoint the management of financial institutions, and recover funds to settle disputes. It can also appoint guardians tasked with managing the institution and its assets, terminate or close out contracts, transfer or sell assets and obligations, override rights of shareholders, restructure the capital, establish temporary entities to manage assets or continue providing key services, carry out an organised liquidation or bailout to ensure the continuity of critical functions.

The decree-law aims to maintain the stability of the national currency, and ensure prudent management of the Central Bank’s foreign reserves.

It enhances consumer protection and dispute resolution by unifying the process for customers of banks and insurance companies under the independent entity "Sanadak". It will also establish specialised judicial committees to adjudicate disputes arising from financial activities, with the committees' decisions being final and enforceable for amounts up to AED100,000.

It also outlines proactive measures for early intervention to address any signs of financial deterioration of a licensed institution in order to ensure financial stability and protection of customers.

Key objectives

1. Licensed financial institutions shall provide all community members with access to proper banking and financial services, in line with digital transformation and financial service innovation efforts.
2. Enhancing consumer protection by unifying the complaints and dispute resolution functions for customers of banks and insurance companies.
3. Establishing proactive measures for early intervention and settlement to address any signs of financial deterioration of a licensed institution.
4. Increasing administration fine to be commensurate with the gravity of the violations and the volume of transactions, up to ten times the value of the violation.
5. Automatic debiting of fines, allowing reconciliation before final judicial rulings and the publishing of penalties settlementon the Central Bank's official website.
6. Maintaining the stability of the national currency, promoting and protecting the stability of the financial system, and ensuring prudent management of foreign exchange reserves.
7. Licensed financial institutions must obtain and keep adequate guarantees for all types of facilities provided to natural persons and sole proprietorships customers.