Telephone Numbers
Telephone Numbers
Banking System in Dubai UAE
For detailed information +90 542 381 3868 'Call.
There are two sources of federal regulatory law in the UAE:
The Banking Law regulates:
The Banking Law does not apply to financial free zones or to FIs regulated by the authorities of these zones.
The two regulatory bodies issue regulations applicable to the FIs under their supervision.
The CBUAE has also issued various updated regulations such as:
The SCA has issued a Rulebook under Decision No. 13/2021. The purposes of the Rulebook are to:
The main laws governing FIs in the DIFC are:
The Dubai Financial Services Authority (DFSA) issues rules and regulations applicable to FIs operating in or from the DIFC.
In the ADGM, the Financial Services Regulatory Authority (FSRA) has issued the Financial Services and Market Regulations (FSMR), which are broadly based on the UK's Financial Services and Markets Act (2000), along with other relevant regulations.
In the free trade zones (of which there are about 40), federal banking regulations apply.
Currently, there are two financial free zones created by constitutional amendment and Federal Law No. 8 of 2004: the DIFC and the ADGM.
Currently, the legal framework for banking regulation in the free zones consists of:
In the UAE, there are four different regulators responsible for the authorization and supervision of banks, insurance companies, and other FIs. These are:
The two regulators in "onshore" UAE are:
The AML supervisor is the Financial Intelligence Unit (FIU), an independent body supervised by the CBUAE.
The distribution of responsibilities between the CBUAE, SCA, DFSA, and FSRA is as follows:
Firms regulated by the DFSA include investment firms, asset managers, hedge funds, brokers, financial advisors, and insurance intermediaries.
Firms regulated by the ADGM include investment firms, asset managers, hedge funds, brokers, financial advisors, and insurance intermediaries.
The sole federal bank regulator in the UAE is the CBUAE, which operates under the Banking Law and issues regulations within the powers granted by the law (see above). It issues regulations to banks and other financial institutions under its supervision on matters such as governance, risk management, capital, liquidity, etc.
It also issues regulations related to finance companies, clearing houses, and payments.
The CBUAE regulates the following activities:
The CBUAE regulates stored value facilities, including cryptocurrencies, and the SCA regulates investment crypto assets.
The regulators in the financial free zones regulate various activities to be:
An entity intending to conduct a regulated activity must apply for a license from the CBUAE, which is authorized by the Banking Law to license, govern, and supervise all FIs in the UAE. Article 64 of the Banking Law prohibits any entity from engaging in or promoting unlicensed financial activities.
Entities wishing to conduct banking services must first obtain a license from the CBUAE under one or more of the categories listed below:
The mandatory requirements for the bank application process are:
(Article 67, Banking Law.)
Once the applicant receives the license, it cannot commence its bank licensed activities until its name is registered in the electronic Register of Licensed Financial Institutions published on the official website of the CBUAE. The licensed bank must conduct its activities only under its license (Article 68, Banking Law).
Capital requirements. Applicants must meet the minimum capital requirements under Circular No. 12/2021 on Minimum Capital for Banks (Capital Requirements Rules), Article 6, where banks incorporated in the UAE must have a fully paid-up capital of at least AED 2 billion (approximately USD 545 million).
Branches of foreign banks must provide:
The CBUAE may impose higher minimum capital requirements than those mentioned above for new licenses (Article 6, Capital Requirements Rules).
Applications for financial institutions and banks must be submitted to the CBUAE.
License applications for other FIs such as fund managers, asset managers, brokers must be submitted to the SCA.
There is no online link for applications, and there are no fees payable to the CBUAE, but fees are paid for SCA applications (approximately AED 50,000).
There are links to DFSA/FRSA applications on the websites of the DFSA and FSRA, and fees are paid to the regulatory bodies as part of the process.
Capital requirements are the same as for bank licenses (see above, Capital requirements). Other requirements include, among others, the fitness and propriety of management, adequate corporate governance, IT, and communication systems.
Branches of foreign banks must apply for a license to do business in the UAE. However, if a UAE company is being established on behalf of the financial institution, at least 60% of its shareholders must be UAE nationals. This requirement is also necessary for foreign exchange businesses.
CBUAE process. There is a three-stage process for applying for a banking license:
Applicants must submit an application including a three-year business plan demonstrating that their proposed paid-up capital levels are sufficient to meet the expected regulatory capital requirements over the three-year period based on the projected activities (Article 6, Capital Requirements Rules).
Once the applicant receives the license, the licensed bank must conduct its activities under the license. However, the bank cannot commence its licensed activities until its name is registered in the electronic Register of Licensed Financial Institutions published on the official website of the CBUAE.
When an application is rejected, the applicant must be notified of the reasons for rejection within 20 business days of the date of issuance, and the following must be provided:
Timeframe. The CBUAE must decide on the licensing application or the extension of a license application within 60 business days from the date all conditions and requirements for licensing are met (Article 69, Banking Law). The application is considered rejected if no decision is made at the end of the sixty-day period.
SCA licenses. The SCA application process takes two to three months.
The process for being authorized by the DFSA is as follows:
The timing for processing each application is four to six months from the date of receipt of the applicant firm's full and complete application.
There is no cost for a CBUAE license; however, other regulators like the DFSA and FSRA charge fees for applications.
There is no prohibition on foreign banks operating in the UAE from lending or accepting deposits.
Article 74 of the Banking Law explicitly states that branches of foreign banks operating in the UAE are not required to be registered as public joint-stock companies.
However, there are prohibitions on the scope of a foreign bank's activities. For example, foreign banks are not allowed to hold mortgages on real estate, and such banks must resort to a local security agent, which is a bank or financial institution licensed by the CBUAE.
A law enacted in 2016 creates a secure registry for movable property, and foreign banks can register and hold movable property as collateral without needing a local security agent (Law No. 20 of 2016 on securing movables as collateral for debts (amended by Law No. 4 of 2020 concerning the security of rights over securities)).
There are certain restrictions on insurers and insurance brokers, who must be licensed by the CBUAE, which means foreign insurance companies cannot insure assets located in the UAE.
Similar restrictions apply to the promotion and marketing of foreign funds in the UAE. This must be done through a local intermediary licensed by the SCA.
The UAE does not have financial services "passporting" arrangements with any other jurisdiction (such as those operating in the EU). However, the DFSA has signed various memoranda of understanding with foreign regulators.
The definition of a bank under the UAE Banking Law is "any legal entity licensed in accordance with the provisions of the Banking Law primarily to carry on the activity of deposit taking and other licensed financial activities".
"Other financial institutions" under the Banking Law are defined as "any legal entity other than a bank licensed in accordance with the provisions of the Banking Law to carry on one or more licensed financial activities".
Article 93 of the Banking Law explicitly provides that banks shall not engage in any of the following prohibited non-banking activities:
The federal state and the various emirates have stakes in almost all commercial banks.
The various emirates are allowed to hold stakes in commercial banks through sovereign wealth funds created by government decrees. For example, Dubai owns 55.75% of ENBD Bank through the Investment Corporation of Dubai.
There is no legally mandated minimum shareholding for any state or emirate, but the State, through the Emirates Investment Authority, has the right to own a 5% stake in every public joint-stock company, and banks are legally authorized to be public joint-stock companies.
Most licensed banks are universal banks with investment banking and private banking arms.
There are seven or eight foreign investment banks in the UAE, most of which are foreign banks. However, in the financial free zones, there are about seven investment banks in the DIFC and about 17 in the ADGM.
There are numerous private banks in the financial free zones, but none onshore.
"Low-risk" financing institutions are allowed to take deposits up to AED 5 million from natural persons, which can only be used for lending purposes or reinvested with other UAE-licensed banks. These are regulated by the CBUAE.
There is no separate regulation for SIFIs.
Under Article 74 of the Banking Law, UAE banks must take the legal form of public joint-stock companies governed by:
The requirements for the group structure of banks are set out in the Corporate Governance Regulation for Banks (Circular No. 83/2019 of 18 July 2019) issued by the CBUAE.
The bank's board of directors may have subsidiaries, affiliates, and overseas branches for which it will be responsible.
The CBUAE is the primary regulator of the banking group and requires it to establish a governance framework appropriate for the group's structure, business, and associated risks. This framework must also be functional and subject to the supervision of the board of directors, which must be able to understand the group structure and the risks arising for each entity and line of business.
Corporate governance for banks can be found in the Corporate Governance Regulation for Banks (CG Regulation), supported by the Corporate Governance Standards for Banks (CG Standards). The CG Standards are mandatory and set out the specific duties of the board in performing its various responsibilities, including the duties of:
There are also specific rules regarding:
The following organizational elements are regulated in the Banking Law and the Central Bank Regulation.
Under the direction and supervision of the board of directors, senior management must conduct and manage the bank's activities in a manner consistent with the business strategy, risk appetite, remuneration, and other policies approved by the board.
The Risk Management Standards issued under the CBUAE's Risk Management Regulation clearly outline the risk governance framework for banks.
The bank's board of directors is ultimately responsible for the supervision of the bank. The board must ensure that the bank has a comprehensive risk management framework that reflects the risk profile, nature, size, and complexity of the bank's business and structure.
The bank must appoint a chief risk officer (CRO) or equivalent who is independent of management and the decision-making authority over the bank's risk-taking operations.
The committees and their duties mandated under the Risk Management Standards are as follows:
Remuneration requirements are regulated in Article 12 of the CG Regulation, which requires the bank's board to approve the remuneration of senior executives, namely the executive committee consisting of the chief executive officer, chief financial officer, head of compliance, and chairman of the board.
The Regulation states that the remuneration of board members and those who undertake risk management duties should generally be fixed and should reflect the nature of their responsibilities as board members.
Bonuses must be based on the bank's performance and should not exceed 5% of the bank's net profit for all staff (excluding board members). If the bank intends to award a higher bonus, approval from the bank's general assembly and board of directors is required.
However, the remuneration of senior executives and material risk takers (as determined by the bank) can be performance-based, provided that annual individual bonuses do not exceed 100% of the fixed rate of their total remuneration.
If the bank proposes to pay a bonus, approval must be obtained as follows:
The board may include provisions for the reduction of remuneration due to a breach of law, regulation, and codes of conduct by a single executive.
The risk management rules for banks can be found in the Risk Management Regulation, which includes the Risk Management Standards (see Question 11). This regulation details the specific rules applicable to banks and the appropriate risk governance framework and systems required.
The CG Regulation requires that a bank must have an appropriate risk governance framework that covers all material risks that it and, if possible, the group may face. Specifically, such policies must cover the processes, procedures, systems, and controls to timely identify, measure, evaluate, monitor, report, and control or mitigate significant sources of risk.
The bank's risk management function must be independent of the bank's management and decision-making faculty and have a direct reporting line to the bank's board of directors.
The capital adequacy framework is outlined in the Capital Adequacy Standards for Banks in the UAE (Capital Adequacy Standards), as most recently issued by the CBUAE in December 2022. These standards are applicable to all banks operating in the UAE, including all banking subsidiaries globally, and are applied on a consolidated basis.
The requirements are based on the capital adequacy framework developed by the Basel Committee on Banking Supervision (BCBS).
The CBUAE has issued the Re-Liquidity Regulation in Banks (Circular No. 33/2015) (Liquidity Regulation), which outlines qualitative and quantitative requirements applicable to all banks. The rationale behind this policy is to align the UAE with the BCBS recommendations and best practices.
The qualitative requirements include a liquidity risk management framework that includes recommended requirements such as:
Additionally, the bank must have a formal contingency funding plan for emergencies to address liquidity shortfalls.
The quantitative requirements are designed to ensure:
Based on these two objectives, the CBUAE requires banks to comply with one of the following:
Banks that choose to follow the LCR ratio must:
The leverage ratio is defined as the capital measure divided by the exposure measure, expressed as a percentage.
The capital measure is Tier 1 capital as defined for the purposes of the CBUAE risk-based capital framework, subject to transitional arrangements. In other words, the capital measure for the leverage ratio at a given point in time is the Tier 1 capital measure applicable at that time under the risk-based framework.
The minimum requirement for the leverage ratio is set out in the Capital Adequacy Standards. Under this standard, the CBUAE may consider temporarily exempting certain central bank "reserves" from the leverage ratio exposure measure to facilitate the implementation of monetary policies in exceptional macro-economic circumstances.
"Reserves" refers to certain bank balances or settlements at the CBUAE. Some other jurisdictions have pursued monetary policies that have resulted in a significant increase in such bank balances at the CBUAE, for example, through policies often described as "quantitative easing."
Although the CBUAE has no plans to implement such policies, the inclusion of this flexibility in the Standards ensures that if such policies were to be implemented, the minimum leverage requirement could be adjusted to allow it to continue to serve its appropriate prudential purpose.
Under the BCBS framework, the CBUAE would also proportionally increase the calibration of the minimum leverage ratio requirement to offset the effect of the exempted central bank reserves, as the actual bank leverage ratios would be expected to increase due to the exclusion of these exposures.
The Banking Supervision Department at the CBUAE supervises all licensed institutions in the UAE. The objectives of this department are aligned with the BCBS Core Principles for Effective Banking Supervision, which is to "promote the safety and soundness of licensed FIs," especially in the banking, insurance, payments, and remittance sectors.
Banks for which the CBUAE is the primary regulator and which have significant group relationships, including subsidiaries, affiliates, or international branches, must develop and maintain processes to coordinate the identification, measurement, assessment, monitoring, reporting, and control of significant risk worldwide.
The methods and procedures applied to subsidiaries, affiliates, and international branches should support group-wide risk management.
Banks must conduct group-wide risk management and establish group policies and procedures, while the boards and senior management of subsidiaries should have input regarding the local or regional application of these policies and procedures and the assessment of local or regional risks.
In cases where the CBUAE is not the primary regulator of a bank that is part of a group, and any element of its comprehensive approach to risk management is controlled or influenced by another entity in the group, the bank's risk governance framework must specifically consider the risks arising.
The links and significant differences between the bank and the group risk governance framework.
Under the Major Acquisitions Regulation (Circular No. 02/2020 issued on 24 March 2020), the CBUAE's approval is required before a bank acquires or disposes of any of its obligations. Written approval is also required before a major acquisition, defined as an acquisition or investment by a bank, is completed by the bank:
TRC is the sum of a bank's Core Equity Tier 1, Additional Tier 1, and Tier 2 capital.
However, regardless of the 5% TRC threshold, the CBUAE has the discretion as to whether an acquisition is considered a major acquisition.
As part of the reporting requirements to obtain the CBUAE's approval, the bank must provide at least the following:
The national shareholder of the bank must own at least 60% of the total shares, but the CBUAE board may set this ratio higher and may stipulate conditions and controls for the ownership of shares in banks.
However, no person may directly or indirectly hold or dispose of a stake of 5% or more in a bank, which is the total of issued common stock and financial instruments convertible into common stock, without the prior written consent of the CBUAE.
Article 76 of the Banking Law does not impose specific restrictions on foreign shareholdings in banks but outlines the minimum national shareholding as stated in Question 19.
The legal framework for the liquidation of banks is governed by:
The Bankruptcy Law provides a legal framework to help distressed entities avoid bankruptcy or liquidation through the following mechanisms:
There is no specific track other than the Financial Constraint Committee regime specified in Question 21 and the procedures set out in Articles 116 and 117 of the Banking Law.
There is no separate obligation provided by the Banking Law, other than those provided under the Bankruptcy Law, which allows an insolvent but salvageable institution to prepare a restructuring plan that can be submitted to the vote of the creditors and for the sanction of the competent bankruptcy court.
The CBUAE board must establish a resolution framework for banks to minimize the effects of a deficiency in their financial positions on the financial system in the UAE. This includes the effects related to a deficiency in the financial position of companies owned by such banks or their subsidiaries.
The resolution framework must include a set of both prudential and qualitative triggers that indicate material risks that would result in a deficiency in the financial position of institutions, banks, and Financial Intermediaries.
To achieve this, the CBUAE must, at its discretion, carry out any of the following measures and actions for the protection of the relevant institution and its depositors:
The CBUAE has the authority to allow any licensed financial institution to acquire another licensed financial institution.
The CBUAE makes regulations regarding the mergers and acquisitions of licensed financial institutions (including banks) (Banking Law, Article 100).
Under the major acquisition regulations (Circular No. 2/2020), written approval is required for any major acquisition of any other bank (one exceeding 5% of the total regulatory capital).
The bank making a major acquisition must submit certain documents and projections to the CBUAE, including a due diligence report and projections of any potential impact on the acquiring bank.
The CBUAE will evaluate the application and notify the applicant of its decision.
Although the principles of measures for the restructuring and liquidation of licensed financial institutions are mainly regulated in Articles 116 and 117 of the Banking Law, the detailed framework for these measures has not yet been established.
Sanctions can range from a warning to fines of up to AED 10 million and/or imprisonment.
Banks are required to have a formal complaints unit to resolve consumer issues. They must resolve the complaint] within a reasonable time, but "reasonable" time is not defined by the CBUAE.
If the issue remains unresolved, the consumer should seek legal advice or refer the dispute to the courts. Alternatively, the consumer can file a complaint with the Consumer Protection Department at the CBUAE.
On 20 September 2022, the CBUAE announced that it plans to establish an Ombudsman called "Sanadak," which is a consumer complaints unit.
Currently, the CBUAE offers a complaint management system that allows consumers who are individuals or sole proprietorships to file a complaint directly with the CBUAE.
Under the recent Banking Law, the CBUAE has developed an arsenal of regulations that have greatly strengthened its supervisory and enforcement powers.
The CBUAE is currently focused on the Fintech space, predominantly open banking and a CBUAE digital currency, as well as SVFR and PSPs.
In terms of supervision and enforcement, the CBUAE is focused on combating money laundering and the financing of terrorism, and over the past few years, has imposed a series of sanctions and strict measures against banks and other exchanges whose compliance systems have been shown to be lax.
A Q&A guide to setting up a business in the United Arab Emirates.
This Q&A provides an overview of the key issues related to setting up a business in the United Arab Emirates; an introduction to the legal system; available business vehicles and their applicable formalities; corporate governance structures and requirements; foreign investment incentives and restrictions; currency regulations; and tax and employment issues.
The legal system of UAE Dubai is founded on civil law principles, along with Islamic sharia law. Sharia law influences criminal and civil law but does not fully encompass commercial laws. The legal system includes both sharia courts and civil courts; these govern different areas of the law. However, the financial free zones in UAE Dubai, namely the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), practice a common law system and have their own independent courts where cases are heard in English.
UAE Dubai is a federation of seven emirates: Dubai, Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain.
The UAE Dubai Constitution grants certain powers to the federal government, while allowing each emirate to have its own authorities and control over its internal security and its oil and mineral wealth.
UAE Dubai is divided into mainland and free zones. Each emirate has:
Companies established in any free zone in UAE Dubai can be 100% foreign-owned, compared to the UAE Dubai mainland where certain foreign ownership restrictions may apply in limited situations (see Question 20). Furthermore, Emiratisation requirements do not necessarily apply in the free zones.
Definition. A sole proprietorship is a simple method of business where an individual trades on their own account through a trade license issued in their name. This form of business is referred to as an "establishment" rather than a company.
UAE Dubai citizens and citizens of Gulf Cooperation Council (GCC) countries (subject to certain conditions) generally form sole proprietorships in Dubai.
Foreign nationals can also establish sole proprietorships, but the foreign sole proprietor must appoint a local service agent (an independent representative who is a UAE Dubai citizen or a company 100% owned by UAE Dubai citizens and who has no legal interest or liability in the business, but can act as its representative in UAE Dubai).
Advantages and disadvantages. The advantage of this form is the low costs and formalities. The disadvantage is that the business does not have a separate legal personality from its owner, and therefore the sole owner is personally liable for the liabilities of the business to the full extent of their assets.
Definition. A general partnership is an arrangement between two or more partners where each partner is jointly and severally liable without limit for the liabilities of the partnership.
Advantages and disadvantages. The partners must be natural persons and are jointly and severally liable for the debts of the company to the full extent of their personal assets. There is no real advantage to this legal form, and it is therefore rarely used.
Definition. The Federal Law No. 32 of 2021 on Commercial Companies (CCL) defines a limited partnership as a company consisting of both:
Advantages and disadvantages.
The risk management rules for banks in Dubai, UAE can be found in the Risk Management Regulation, which includes the Risk Management Standards. This regulation details the specific rules applicable to banks and the appropriate risk governance framework and systems required. The CG Regulation stipulates that a bank should have an appropriate risk governance framework covering all significant risks that it and, where possible, the group may face. Specifically, such policies should cover processes, procedures, systems and controls to timely identify, measure, assess, evaluate, monitor, report and control or mitigate significant sources of risk. The bank's risk management function should be independent from the bank's management and decision-making faculty and have a direct reporting line to the bank's board of directors.
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