The new UAE Central Bank law


On 23 September 2018, the President of the United Arab Emirates (“UAE”) issued a new Central Bank law (Decree-Law No. 14 of 2018 (the “New Central Bank Law”) which came into effect on 1 October 2018. The New Central Bank Law reconfirms the UAE Central Bank’s role in supervising the banking system in the UAE, directing monetary policy and ensuring economic stability through adequate fiscal policies and consumer protection mechanisms. The New Central Bank Law also extends the scope of authority of the Central Bank through changes designed to modernise the framework for the licensing and supervision of financial services activities in the state to bring regulation in line with international best practice.

The previous Central Bank Law (Federal Law No. 10 of 1980 Regarding the Central Bank, the Monetary System and Organization of Banking) (the “Old Law”), had become outdated given the advancement of the UAE banking system and, together with Federal Law No. 6 of 1985 Regarding Islamic Banks, Financial Institutions and Investment Companies is repealed and replaced entirely by the New Central Bank Law. However, existing Central Bank regulations, circulars and decisions issued under these repealed laws will remain in force until new ones are issued, for which the New Central Bank Law has set a maximum period of three years.

In principle, the New Central Bank Law only applies in the UAE outside of the financial free zone areas (i.e. the Dubai International Financial Centre (“DIFC”) and the Abu Dhabi Global Market (“ADGM”)). However, the Central Bank may extend its reach to licenced financial institutions (“LFI”) operating within such financial free zone areas, subject to the cooperation of the free zone authorities.

The Central Bank will determine a transitional period for LFIs to comply with the provisions of the New Central Bank Law, which will not have retrospective effect. 

Financial activities, licencing and prohibitions

Under the Old Law, licensing and regulation of financial institutions was based on the type of entity (e.g. commercial bank, investment bank, financial and monetary intermediary). The New Central Bank Law moves to a system of licensing and regulation based on the type of financial services carried out, this is in line with the financial services regulatory frameworks in operation in the DIFC and ADGM.  There is a general prohibition on carrying out any regulated financial service in or from the UAE without a Central Bank licence and the categories of financial services (“Licensed Financial Activities”) falling within the UAE Central Bank’s remit are:

  • taking deposits of all types, including Shariah compliant deposits;
  • providing credit facilities of all types;
  • providing funding facilities of all types, including Shariah-complaint funding facilities;
  • providing currency exchange and money transfer services;
  • providing monetary intermediating services;
  • providing stored values services, electronic retail payments and digital money services. e.g. providing virtual banking services;
  • arranging and/or marketing for Licensed Financial Activities; and
  • acting as a principle in financial products that affect the financial position of the LFI, including but not limited to foreign exchange, financial derivatives, bonds and sukuk, equities, commodities, and any other financial products approved by the Central Bank.

The inclusion of activities relating to the provision of electronic retail payments, digital money services and virtual banking services seeks to deal with modern developments in the financial landscape which were not adequately dealt with under the Old Law. There is currently no guidance on what practices each activity category covers but the New Central Bank Law mandates that the Board of Directors of the Central Bank (the “Board”) will classify and define the Licensed Financial Activities as well as issuing rules, regulations and standards and determine the conditions for granting licences for such Licensed Financial Activities. It may also amend the list of Licensed Financial Activities through a Financial Activities Committee to be established under the New Central Bank Law under the chairmanship of the Minister of Finance and including representatives of each of the other UAE regulatory authorities.

The New Central Bank Law also now specifically prohibits the promotion of financial activities without a licence, this plugs a regulatory gap as previously only the promotion of financial products was specifically regulated in the UAE under regulations issued by the Securities and Commodities Authority (“SCA”). The Board is empowered to issue rules and regulations relating to this prohibition, including any exemptions of activities or practices or categories of persons from the prohibition. This secondary regulation will be key to determining the practical effect of the prohibition on existing promotion practices and until those regulations are issued there will be some uncertainty that may affect the way general financial services capabilities are promoted in the UAE, particularly by foreign service providers who may need to be more cautious in their approach to such activities until further guidance or exemptions are issued.

The list of Licensed Financial Activities under the New Central Bank Law is not as broad as the remit of other financial services regulators in the UAE (for example, that of the DIFC regulator, the Dubai Financial Services Authority) indicating concurrent jurisdiction with other regulators in the UAE, such as the SCA which maintains its licensing function for financial services activities related to capital markets and funds and the Insurance Authority who continues to regulate insurance related financial activities. However, LFIs wishing to conduct activities which are not among the financial activities listed in the New Central Bank Law and which are subject to the regulation of another authority in the UAE or any other jurisdiction will first require the Central Bank’s approval in order to apply for a licence from the respective authority.

Under the New Central Bank Law, the Central Bank will establish an electronic “Register of Financial Institutions” including the names and data of all LFIs, which will be published on the Central Bank’s website. LFI’s will not be permitted to carry on any Licensed Financial Activities until their name is entered on the register.

Principal task: stability

One of the main objectives of the Central Bank is to ensure the stability of the UAE’s financial system and this is at the core of the New Central Bank Law. In order to achieve this objective, the Central Bank and the Board’s tasks include:

  • establishing policies and issuing regulations for the licensing of, prudential supervision of, and the standards and guidelines to be followed by, LFIs;
  • issuing regulations for the protection of customers of LFIs (including setting limitations on credit facilities which may be provided); and
  • ensuring good conduct (partly through detailed reporting requirements which include the submission of quarterly statements to the Central Bank on the credit and funding facilities provided in that quarter) and the maintenance of sufficient reserves by deposit taking LFIs.

The Board is also authorised to issue regulations regarding the protection of deposits held at LFIs and the rights of depositors. Whereas the Old Law mandated a minimum capital requirements, the New Central Bank Law empowers the Board to issue regulations on minimum capital requirements for LFIs and to determine its risk based requirements. In addition the Board has the authority to determine the local and foreign ownership requirements/limitations for LFIs (subject to any activities reserved for UAE nationals), although deposit taking banks incorporated in the state are still required to have a minimum of 60% UAE national ownership under the New Central Bank Law.

The Central Bank may elect to publish any draft rules and regulations for public consultation, thereby paving the way for enhanced public participation in the drafting of legislation, but it is not required to do so and may not where it considers consultation would not be in the public interest or is contrary to the Central Bank’s objectives.


The New Central Bank Law has also sought to formalise the confidential nature of all data relating to the customers of banks and LFIs and their facilities and transactions with them, decreeing that such information may not be disclosed unless under certain circumstances, such as a court judgment ordering disclosure. Any person found to have disclosed this information faces imprisonment, as well as a fine. The Central Bank is tasked with publishing further rules and policies on confidential information relating to banking activities – these will need to be adopted by banks and LFIs conducting business in the UAE. 

Higher Shariah Authority

A new supervisory authority, the Higher Shariah Authority, is to be established under the New Central Bank Law. The Higher Shariah Authority will be primarily responsible for determining the rules and standards applicable to, and conducting external audits on, businesses which conduct the entirety or certain segments of their business in compliance with Islamic Shariah principles. The decisions of the Higher Shariah Authority will be binding on such LFIs and the internal Shariah supervisory committees that they are required to establish under the New Central Bank Law. The Board shall issue a decision formally establishing the authority, appointing its members and setting out more detail on its functions, responsibilities of its members and their term of office. The costs of this authority will be borne by the Shariah compliant businesses falling under its supervision.

Penalties and Appeals

The Central Bank’s enforcement powers have been strengthened and the New Central Bank Law grants it authority to impose a broad range of penalties against violators of the law. These include administrative and financial sanctions ranging from cautions and orders to comply, to fines and licence suspension or revocation.

To encourage a compliance culture, LFIs, together with their legal representatives, compliance officers and auditors, are responsible for immediately reporting to the Central Bank any violations of the New Central Bank Law (including related regulations and decisions) and any material developments with may impact the LFI’s activities, structure or overall position. The Central Bank will establish a system for reporting such matters and any person making a report to the Central Bank in good faith will not be considered to have breached any of their obligations and may not be dismissed by the relevant LFI without the Central Bank’s approval.

Alongside the enforcement powers granted to the Central Bank, the New Central Bank Law provides that an independent committee named the Grievances and Appeals Committee will be established under the chairmanship of a Court of Appeal judge and including amongst its members two additional Court of Appeal judges and two experts nominated by the Board. The committee will hear and decide on appeals against the Central Bank’s decisions relating to licensing, authorisation of individuals and the licensing and designation of financial infrastructure systems. It has authority to hear witnesses, appoint experts and suspend decisions of the Central Bank until concluding the dispute.


The New Central Bank Law has been highly anticipated for some time, with the Old Law being unable to cater to the advances made in the UAE banking sector in the preceding four decades and lacking the sophistication of other comparable jurisdictions. Secondary legislation will be instrumental in providing the detailed provisions to implement the New Central Bank Law and we will continue to monitor developments and issue further Law Now updates as more information becomes available and legislation is published.

Please get in touch with us if you would like to discuss what the New Central Bank Law may mean for your business and prospects in the UAE.