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The United Arab Emirates offers one of the best and most reliable banking systems in the world with strict banking regulations and governmental laws. Presently, the banking sector in UAE consists of 21 nationalised and over 50 international banks offering their services at par with international standards and meeting the local requirement and banking regulations in UAE. The Central Bank of UAE is responsible for monitoring and regulating all the banking activities in the country. Under its rigid and strict banking laws, obtaining a financial institution license becomes very difficult. It is for this reason that UAE features only the most reputable and well-funded banks. The banks work smoothly under its supervision while contributing their part to the national economy.
UAE has highly evolved and developed banking regulations that monitor banks and financial institutions’ activities. Some of the important banking regulations are mentioned below:
The Central Bank of UAE is the regulatory body and is responsible for resolving tasks like currency management, monetary policy definition and strictly exercising the banking regulations in UAE. The bank administers and implements various policies, enhancing credibility and maintaining transparency in the UAE banking system. For this reason, the bank has published laws and regulations to define banking services to the customers. Instances of some of the major banking regulations are given below -
A few important regulations also apply to the bank account opening in the UAE and must include necessary documents as mentioned below -
Besides these requirements, the banks can ask for additional documents at their discretion at any stage of the account opening process. The requirement may vary depending on the financial institution type and banking services.
In addition, the UAE banks uphold the citizens’ right to personal information confidentiality.
For this reason, UAE stands among the top 10 countries in terms of citizen confidentiality rights in the world according to the Tax Justice Network and Financial Secrecy Index of 2015.
The Central Bank of UAE is authorised to regulate and closely monitor all the banks and bank account operations in the country. UAE Central Bank regulates the following entities:
Numerous local and international commercial banks operate in the country offering commercial banking services. The local banks are generally the public shareholding companies and licensed under the provisions of UAE Federal Law no. 10 (1980). The Central Bank of UAE grants licenses to the international banks operating through their branches in UAE under the same law.
Several banks in UAE offer Islamic banking services that are governed by Sharia laws and Federal Law No. 6 of 1985 concerning financial institutions, investment companies and Islamic banks. Moreover, according to Article 3 of the same federal law, financial institutions can execute all financial, commercial and banking services similar to the banks mentioned in Federal Law No. 10 (1980).
Due to a large number of expats, inward and outward remittances are common phenomena in UAE, making money changing a big business. Central Bank of UAE administers the moneychangers with its Resolution No. 123/7/1992 which was circulated on November 29, 1992. According to the resolution, the companies registered under the Commercial Companies Law can practice money changing. Such companies must have at least 60 percent public/national shareholding of the total paid-up capital with a minimum capital of AED 1 or 2 million, depending on the scope of business. To set up a money-changing business, an individual must be a UAE citizen and at least 21 years of age.
Any non-resident sending money to their home country through moneychangers needs to furnish Emirates ID and income certificate.
The banking regulations of the UAE are quite strict for investment banking. As per the Federal Law 10 of 1980, the banks cannot entertain deposits with a maturity tenure of less than 2 years. However, they may borrow funds from their head office, financial markets or local or international banks. UAE Central Bank issues the license according to Regulation No. 21/2/88 of June 1988. Individuals can check the list of investment banks on the Central Bank of UAE’s official website.
Monetary Intermediaries are the businesses responsible for sales and purchases of foreign/domestic bonds and stocks, currencies and intermediating money market transactions. UAE Central Bank’s Resolution No. 126/5/95 of June 1995 regulates these businesses. The resolution lays down the criteria that the intermediary must be a UAE national and should be a minimum of 21 years old.
If the intermediary is a company, then it must have a national/public shareholding of at least 60% of the paid-up capital and a minimum capital of AED 1-2 million, depending on the business scope.
Securities and Commodities Authority grants licenses to such businesses purchasing or selling local/international shares. UAE Central Bank, however, offers licenses to businesses dealing in commodities and currencies.
UAE Central Bank Resolution No. 164/8/94 of April 1995 defines financial investment companies’ regulations. A financial investment company is referred to as one if they perform the following functions -
An investment company should have a capital of at least AED 25 million and be liable to increase as per the company’s business operations. In addition, the resolution also requires a public shareholding of at least 51% of the paid-up capital and satisfying other terms & conditions.
Any company performing one or more of the following operations is referred to as a finance company.
UAE Central Bank’s Resolution No. 58/3/96 of April 1996 and Resolution No. 165/06/2004 of December 2004 monitor such Islamic and conventional finance companies. As per the regulations, the finance company cannot contribute more than 7% of its own capital for projects, deposit certificates, etc. The finance company must have a paid-up capital of at least AED 35 million and a public shareholding of a minimum of 60% of the total paid-up capital.
Banking regulations and laws in UAE are considered as one of the most secured policies in the world. UAE government assures that all bank-related transactions, fund deposits and various other banking activities take place in a secured manner. Moreover, the banks and financial institutions are monitored by the Central Bank of UAE, ensuring a safe and robust banking system.