UAE President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued a key Federal Decree concerning the Central Bank and organisation of financial institutions and their activities.

 

The law represents a paradigm shift in the way financial institutions will be regulated and supervised, top officials said. 

 

The new law is expected to enhance the performance of monetary policy and ensure the stability of the currency in the state, and also contribute to the establishment of better regulatory frameworks for monitoring the status of credit in UAE, said Sheikh Hamdan bin Rashid Al Maktoum, Deputy Ruler of Dubai and UAE Minister of Finance.

 

The provisions of this law do not apply to the financial free zones in the state and the financial institutions regulated by the authorities of those zones, said a Wam news agency report.

 

"The law facilitates development of the supervisory framework, along with the disclosure, compliance procedures and governance in the Central Bank operations. The law shall enhance monetary performance and boost confidence in the national economy," he said.

 

Sheikh Hamdan also said that the law would enhance the Central Bank’s ability to regulate financial activities, and determine the standards required for the development and improvement of prudential measures in accordance with best international practices. The law also grants the Central Bank powers to better manage foreign reserves by holding adequate foreign currency reserves in all times. Moreover, the law helps with monitoring the credit status in the UAE towards achieving balanced growth in the national economy.

 

Sheikh Hamdan added that the Ministry of Finance is working, in collaboration with all competent authorities in the UAE to ensure coordination between fiscal and monetary policies, as well as developing sound fiscal policies and clear procedures for management of public funds, in accordance with the highest standards of efficiency and transparency. The ministry shall also continue its efforts to improve fiscal performance and to enhance levels of compliance and revenue diversification in such way as to boost UAE’s competitiveness and attractiveness as a global business hub.

 

Mubarak Rashed Al Mansoori, Governor of the Central Bank of the UAE, said: "It is a significant step towards the comprehensive development of the financial sector in the UAE and reinforcement of Central Bank’s independence and regulatory powers. This will promote effective control over the financial sector in line with international best practices and standards." 

 

He stated that the law includes a number of new provisions relating to enforcement, good governance of financial institutions licensed by the Central Bank, oversight of the financial infrastructure in the UAE, in addition to encouragement of fair competition and enforcement of customer protection.

 

The philosophy of the new law is based on licensing specific financial activities and subjecting individuals with key functions in those institutions to the fit and proper criteria required for authorisation to carry on their functions.

 

The new law strengthens CBUAE’s enforcement powers to impose a broad range of administrative, financial sanctions and penalties on licensed financial institutions that are in violation of the provisions of this law. The new law authorises CBUAE staff, designated per decision issued by the Minister of Justice in coordination with the Governor, to have the capacity of judicial officers. This gives CBUAE capacities to verify and penalise any violations of the provisions of this law.

 

For the first time, the law sets out clear provisions governing the financial infrastructure of the UAE. CBUAE may, according to the provisions of this law, designate in cooperation and coordination with other regulatory authorities in the state any financial infrastructure system for clearing and settlement as systemically important. As such, CBUAE shall assume oversight over operations of such systemically important systems and shall ensure their soundness, in accordance with relevant international standards. 

 

Furthermore, the law sets provisions for payment and settlement finality, which are necessary for the preservation of rights in underlying transactions and the protection of operations and funds transfer conducted through clearing and settlement systems.

 

Further to the new enforcement powers granted to CBUAE, an independent committee, named Grievances and Appeals Committee will be established under the chairmanship of a court of Appeal judge. The committee shall have the sole and exclusive jurisdiction to decide on grievances and appeals against any decisions by CBUAE related to licensing, authorisation of individuals, and licensing and designation of financial infrastructure systems.

 

The new law also contains specific provisions for customers’ protection and sets out comprehensive rules governing the confidentiality, protection, and appropriate use of customer banking and credit information, and to facilitate greater financial inclusion.