CBUAE issues new regulations for low risk specialized banks

By Amirtha P S, Desk Reporter
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The Central Bank of the UAE (CBUAE) has issued a new regulation focusing on the licensing, prudential and conduct requirements for specialized banks.

Under the new regulation of CBUAE, specialized banks will be licensed and they will be enabled to conduct different financial activities to serve the local community such as account opening, card issuance, and retail and wholesale lending. These banks are permitted to provide their services to UAE nationals and residents only.

The key objective of the new regulation is to provide a regulatory framework under which the specialized banks can operate in the financial sector of the emirate in a robust and prudent manner.

As per the regulation, specialized banks are allowed to conduct their activities in the UAE Dirhams only and operate according to a low credit risk model. They can be set up either as a conventional specialized bank without Islamic windows or as an Islamic specialised bank.

Capital requirement 

The regulation mandates the specialized banks to maintain a minimum paid-up capital requirement of $81.6 million and a risk-based capital adequacy requirement that they should continuously adhere to. It also sets the total consolidated assets of specialized banks which shouldn’t exceed $680 billion.

Further, CBUAE highlights the need for specialized banks to comply with all rules, standards, and notices issued for the banking sector, except where there are specific provisions contained in the new regulation which apply to these banks only.

The new regulation was published by CBUAE in the Official Gazette on 31 March 2021 and it came into effect on 30 April 2021.

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