The UAE has enhanced the authority of the Central Bank over the licensing and regulation of all financial institutions and their activities in the UAE, with the issuance by Decree of Federal Law No. (14) of 2018 (the Central Bank Law). This effectively repeals and replaces the Central Bank Law of 1980 (the 1980 Law), which has become out of date and no longer adequately caters to the needs of the highly complex financial industry, which has developed tremendously over the last 40 years.
In line with international best practices and standards including those set by the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS), the Central Bank Law introduces some key enhancements and entrusts broad authority to the UAE Central Bank to carry out:
- Licensing and regulation of all financial institutions based on activity, including a general prohibition on carrying out or promoting unlicensed financial activities;
- Prudential supervision and implementing regulations for licensed financial institutions and activities;
- Imposing administrative and financial sanctions and reporting obligations for financial institutions;
- Establishing the Higher Shari’a Board, including determining its powers and functions as well as the appointment of its members by the Board of Directors of the UAE Central Bank; and
- Implementing the UAE’s monetary policy to protect the local financial system and maintain the stability of the national currency.
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