The Central Bank seeks to promote the effective and efficient development and functioning of the banking system. To this end, Banks are required to have a comprehensive approach to corporate governance to ensure their resiliency and enhance overall financial stability. In particular, Banks and Groups must have robust corporate governance policies and processes covering strategy, organizational structure, control environment, risk management responsibilities and compensation of Boards and Staff.

In introducing this Regulation and the accompanying Standards, the Central Bank intends to ensure that Banks’ approaches to corporate governance are in line with leading international practices.

This Regulation and the accompanying Standards establish the overarching prudential framework for corporate governance. Regulatory requirements for selected governance areas such as risk management, internal controls, compliance, internal audit, financial reporting, external audit and outsourcing are established in separate Central Bank Regulations and Standards.

This Regulation and the accompanying Standards are issued pursuant to the powers vested in the Central Bank under the Central Bank Law.

Where this Regulation, or its accompanying Standards, include a requirement to provide information or to take certain measures, or to address certain items listed at a minimum, the Central Bank may impose requirements that are additional to the listing provided in the relevant Article.

The objective of this Regulation is to establish the minimum acceptable standards for Banks’ approach to corporate governance, with a view to:

1. Ensuring the soundness of Banks; and
2. Contributing to financial stability and consumer protection.

The accompanying Standards supplement the Regulation to elaborate on the supervisory expectations of the Central Bank with respect to corporate governance for Banks.

The Bank's Board is in ultimate control of the Bank and accordingly ultimately responsible for the Bank’s corporate governance. There is no one-size-fits-all or single best solution. Accordingly, each Bank could meet some elements of the minimum requirements of the Regulation and Standards in a different way; the onus is on the Board to demonstrate to the Central Bank that it has implemented a comprehensive approach to corporate governance.¹ Banks are encouraged to adopt leading practices that exceed the minimum requirements of the Regulation and Standards.
 

¹The Central Bank will apply the principle of proportionality in the enforcement of the Regulation and Standards, whereby smaller Banks may demonstrate to the Central Bank that the objectives are met without necessarily addressing all of the specifics cited therein.

This Regulation and the accompanying Standards apply to all Banks. Banks established in the UAE with Group relationships, including Subsidiaries, Affiliates, or international branches, must ensure that the Regulation and the Standards are adhered to on a solo and Group-wide basis.

Branches of foreign Banks licensed to operate in the UAE must adhere to this Regulation and Standards or establish equivalent arrangements so as to ensure regulatory comparability and consistency, with the exception of Article (3) of this Regulation. Branches of foreign Banks must establish local governance structures that meet the objectives of Articles (2) and (4) of this Regulation.

This Regulation and the accompanying Standards are in addition to the provisions relating to public joint stock companies in the Federal Law No. 2 of 2015 on Commercial Companies (the “Commercial Companies Law”), and the Chairman of Authority's Board of Directors' Resolution No. (7 R.M) of 2016 Concerning the Standards of Institutional Discipline and Governance of Public Shareholding Companies (“SCA Regulation”). In the event of contradiction with any provisions of the SCA Regulation, the requirements of the Central Bank’s Regulation and Standards shall prevail.

1. Affiliate: An entity owned by another entity by more than 25% and less than 50% of its capital.
    
2. Bank: Any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities.
    
3. Board: The Bank’s board of directors.
    
4. Central Bank: The Central Bank of the United Arab Emirates.
    
5. Central Bank Law: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities.
    
6. Chief Executive Officer: The most senior executive appointed by the Board.
    
7. Conflict of Interest: A situation of actual or perceived conflict between the duty and private interests of a person, which could improperly influence the performance of his/her duties and responsibilities.
    
8. Control Functions: The Bank’s functions that have a responsibility independent from management to provide objective assessment, reporting and/or assurance; this includes the risk management function, the compliance function and the internal audit function.
    
9. Controlling Shareholder: A shareholder who has the ability to directly or indirectly influence or control the appointment of the majority of the Board of directors, or the decisions made by the Board or by the general assembly of the entity, through the ownership of a percentage of the shares or stocks or under an agreement or other arrangement providing for such influence.
    
10. Corporate Governance: The set of relationships between the Bank’s management, Board, shareholders and other stakeholders which provides the structure through which the objectives of the Bank are set, and the means of attaining those objectives and monitoring performance. It helps define the way authority and responsibility are allocated and how corporate decisions are made.
     
11. Duty of Care: The duty to decide and act on an informed and prudent basis with respect to the Bank. Often interpreted as requiring Members of the Board to approach the affairs of the Bank the same way that a “prudent person” would approach his/her own affairs.
     
12. Duty of Confidentiality: The duty to observe confidentiality applies to all information of a confidential nature with which a Member of the Board is entrusted by the Bank or which is brought to his or her attention during or at any time after the carrying out of his/her assignment
     
13. Duty of Loyalty: The duty to act in the good faith in the interest of the Bank. The duty of loyalty should prevent individual Members of the Board from acting in their own interest, or the interest of another individual or group, at the expense of the Bank and shareholders.
     
14. First-Degree Relatives: The individual’s parents, siblings and children.
     
15. Fit and Proper Process: The evaluation of a Bank’s proposed members of the Board and Senior Management as to expertise and integrity. The specific fit and proper criteria are listed in article 2.13 of the Standards.
     
16. Government:The UAE Federal Government or one of the governments of the member Emirates of the Union.
     
17. Group: A group of entities which includes an entity (the ‘first entity’) and:
     
    1. any Controlling Shareholder of the first entity;
        
    2. any Subsidiary of the first entity or of any Controlling Shareholder of the first entity; and
        
    3. any Affiliate, joint venture, sister company and other member of the Group.
    
     
18. Higher Shari`ah Authority: The Higher Shari`ah Authority that was established at the Central Bank by the Cabinet Resolution no. (102/ 1/ و5) 2016.
     
19. Independent Member of the Board: A Member of the Board who has no relationship with the Bank or Group that could lead to benefit which may affect his/her decisions. He/she must not be under any other undue influence, internal or external, ownership or control, which would impede the Member’s exercise of objective judgment. The Independent Member of the Board forfeits his/her independence in the cases specified in Article 3.4 of the Standards.
     
20. Islamic Financial Services: Shari`ah compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products.
     
21. Material Risk Takers: Staff whose work is deemed to have a significant impact on the overall risk profile of the Bank or the Group.
     
22. Non-Executive Member of the Board: A Member of the Board who does not have any management responsibilities within the Bank, and may or may not qualify as an Independent Member of the Board.
     
23. Pillar 3: Pillar 3 disclosure requirements – consolidated and enhanced framework issued by the Basel Committee on Banking Supervision in March 2017 and any subsequent revisions.
     
24. Public Joint Stock Company: A Public Joint Stock Company is a company whose capital is divided into equal and negotiable shares. The founders shall subscribe to part of such shares while the other shares are to be offered to the public under a public subscription. A shareholder shall be liable only to the extent of his share in the capital of the company, as per the Federal Law No. (2) of 2015 on Commercial Companies.
     
25. Regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
     
26. Related Parties: The Group and its Controlling Shareholder’s Members of the Board and Senior Management (and their First-Degree Relatives) and persons with control, joint control or significant influence over the Bank (and their First-Degree Relatives).
     
27. Related Party Transactions: Include on-balance sheet and off-balance sheet credit exposures and claims as well as dealings such as service contracts, asset purchases and sales, construction contracts, lease agreements, derivative transactions, borrowings, and write-offs. The term transaction incorporates not only transactions that are entered into with related parties but also situations in which an unrelated party (with whom a Bank has an existing exposure) subsequently becomes a related party; disclosures must reflect all related party events and transactions for the financial period.
     
28. Risk Appetite: The aggregate level and types of risk a Bank is willing to assume, decided in advance and within its risk capacity, to achieve its strategic objectives and business plan.
     
29. Risk Governance Framework: As part of the overall approach to corporate governance, the framework through which the Board and Senior Management establish and make decisions about the Bank’s strategy and risk approach; articulate and monitor adherence to the risk appetite and risks limits relative to the Bank’s strategy; and identify, measure, manage and control risks.
     
30. Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank, generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
     
31. Subsidiary: An entity, owned by another entity by more than 50% of its capital, or under full control of that entity regarding the appointment of the Board of directors.
     
32. Staff: All the persons working for a Bank including the members of Senior Management, except for the Members of its Board.
     

1. Members of the Board must act with integrity, exercising their Duty of Care, Duty of Confidentiality and Duty of Loyalty. They are responsible for ensuring effective control over the Bank’s entire business.
    
2. Members of the Board must ensure that a Bank and, if applicable, Group has robust corporate governance policies and processes commensurate with its risk profile and systemic importance. In the case of offering Islamic financial services, a Bank must fully comply with Shari`ah rules and establish a sound and effective Shari`ah governance framework with the key mechanisms and functionalities to ensure effective and independent Shari`ah oversight, as per the requirements set out by the Central Bank and the Higher Shari`ah Authority.
    
3. Members of the Board are responsible for approving and overseeing implementation of the Bank’s Risk Governance Framework and the alignment of its strategic objectives with its Risk Appetite.
    
4. Members of the Board are responsible for establishing and communicating corporate culture and values through measures including, but not limited to, a written code of conduct, a conflict of interest policy, a whistleblowing policy mechanism, an insider trading policy and a strong internal control environment.
    
5. Members of the Board are responsible for the organizational structure of the Bank and the Group, if applicable, including executing the key responsibilities of the Board and specifying the key responsibilities and authorities of its committees and Senior Management.
    
6. Members of the Board are responsible for overseeing Senior Management, ensuring that the Bank’s activities are carried out in a manner consistent with the business strategy, Risk Governance Framework, compensation and other policies approved by the Board.
    
7. Members of the Board are responsible for establishing a Fit and Proper Process for the selection of Senior Management, including the heads of the risk management, compliance and internal audit functions, and the maintenance of succession plans for Senior Management.
    

1. A Bank’s Board must be sufficiently diverse in its composition. Collectively, the Board must have knowledge of all significant businesses of the Bank, and if applicable, Group. The Board must have an appropriate balance of skills, diversity and expertise commensurate with the size, complexity and risk profile of the Bank, and if applicable, Group.
    
2. A Bank’s Board must be comprised of at least seven (7) members and a maximum of eleven (11) members, each with a maximum three (3) year renewable term of membership. All Members of the Board must be Non-Executive, of which at least one third (1/3) must be Independent members. The chair may be a Non-Executive Member of the Board or an Independent Member of the Board. The Board should not contain any executive members with management responsibilities in the Bank.
    
3. The chair and the majority of the Members of the Board must be UAE nationals.
    
4. The Board may not delegate to the chair all the powers of the Board in an absolute manner.
    
5. The maximum tenure as an Independent Member of the Board in the same Bank is twelve (12) consecutive years from the date of his/her appointment. At the expiration of the tenure, the Member is no longer regarded as Independent.
    
6. A Member of the Board may hold memberships in the boards of up to five (5) Public Joint Stock Companies (PJSCs) in the UAE. This is also applicable to PJSCs inside the banking Group. The Member of the Board may hold memberships in the Board of only one (1) Bank in the UAE and up to four (4) Banks outside the UAE. The Member of the Board must obtain permission from the Bank’s Board before accepting nomination to serve on another Board and no conflict of interest must be present. The provisions of this article shall apply equally to persons appointed by a Government shareholder.
    
7. If the Government owns 5% or more of the Bank’s capital, it may appoint persons to represent it on the Board with the same proportion to the number of Members of the Board with minimum one (1) person. A Government-owned Bank’s Board composition must allow the exercise of objective and independent judgment.
    
8. A Board must have a clear and rigorous process for identifying and selecting all the candidates for the Board of the Bank, and if applicable, Group. This must include a Fit and Proper Process. At least twenty per cent (20%) of candidates for consideration for the Board’s membership must be female.
    
9. The no-objection of the Central Bank must be obtained prior to the appointment, nomination or renewal of any person for membership of the Board. In all cases, a Bank must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fitness and probity of a Member of the Board. The no-objection of the Central Bank must be obtained prior to the removal of a Member of the Board during his/her term of membership.
    

1. The chair of the Board is responsible for the overall effective functioning of the Board and its committees.
    
2. The Board must meet at least six (6) times a year. The Bank must appoint a secretary to the Board of Directors who is not a Member of the Board. The Board and its committees must maintain appropriate minutes, which reflect details of issues discussed, recommendations made, decisions taken and dissenting opinions.
    
3. The Board and its committees may invite members of the Bank’s Staff and external experts to attend meetings as deemed appropriate. Staff of the Central Bank may attend meetings of the Board and/or its committees and have access to their minutes.
    
4. The Board may delegate specific authority, but not its responsibilities, to specialized Board committees. Each committee created by the Board must have a charter or other instrument that sets out its membership, mandate, scope, working procedures and means of accountability to the Board. The committees must have access to external expert advice where needed to ensure a collective balance of skills and expert knowledge commensurate with the complexity of the Bank and the duties to be performed.
    
5. The Board structure must include committees with responsibilities for audit, risk, nomination and compensation. The Board may also establish other specialized committees (e.g. ethics, assets and liabilities, etc).
    
6. The audit and risk committees must not be merged with any other Board committees. Both committees’ chairs must be must be Independent Members of the Board, who are distinct from the chair of the Board and the chairs of other committees. The audit committee must be made up of Independent or Non-Executive Members of the Board and include Members who collectively have experience in audit practices, financial reporting and accounting. The risk committee must be made up of a majority of Independent Members of the Board and include Members who collectively have experience in risk management issues and practices.
    
7. Banks may merge the nomination and compensation committees. Their chairs and members may be Non-Executive or Independent Members of the Board.
    
8. The Board must carry out annual assessments, alone or with the assistance of external experts, of the Board as a whole, its committees, and individual members.
    
9. The Board must establish and periodically update its by-laws, procedural rules or other similar documents setting out its organization, responsibilities and key activities.
    

1. A Bank must have a clearly defined organization structure and decision-making process with authorities delegated by the Board to Senior Management.
    
2. Under the direction and oversight of the Board, Senior Management must carry out and manage the Bank’s activities in a manner consistent with the business strategy, risk appetite, compensation and other policies approved by the Board.
    
3. Senior Management must provide the Board with the information it requires to carry out its responsibilities, including the supervision and assessment of the performance of Senior Management.
    
4. A Board must have a clear and rigorous process for identifying and selecting candidates for the Senior Management of the Bank, and if applicable, Group. This must include a Fit and Proper Process.
    
5. A member of Senior Management may not hold a Staff position in any other entity, neither inside nor outside the banking Group. A member of Senior Management may hold memberships in the boards of up to two (2) non-Bank entities outside the banking Group. In addition, the member of Senior Management, with the exception of Chief Risk Officers and Heads of the compliance and internal audit functions, may hold memberships in the boards of entities inside the banking Group. The member of Senior Management must obtain permission from the Board before accepting nomination to serve on a board in any other entity and no conflict of interest must be present.
    
6. The no-objection of the Central Bank must be obtained prior to the appointment or renewal of employment contract of any member of Senior Management. In all cases, a Bank must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fitness and probity of a member of Senior Management.
    

1. A Bank must enter into any transactions with Related Parties on an arm’s length basis, monitor these transactions, and take appropriate steps to control or mitigate the risks and write off exposures to Related Parties in accordance with standard policies and processes.
    
2. The Central Bank may set, on a general or case-by-case basis, limits for exposures to Related Parties, deduct such exposures from capital when assessing capital adequacy, or require collateralization of such exposures.
    
3. A Bank may extend credit facilities to members of the Board, Staff, and relatives of such persons as determined by the Central Bank in its Regulations as amended from time to time. Credit facilities extended to Staff and their Relatives must be approved by the Board or one of its committees. Credit facilities extended to a Member of their Board must be approved by the whole Board. In all cases, a Member of the Board must abstain from voting on the approval of the credit facilities where he/she may have a related conflict of interest.
    

1. The members of the Board, for which the Central Bank is the primary regulator, having Group relationships including subsidiaries, affiliates, or international branches, are responsible for the Group. This includes the establishment and operation of a clear governance framework appropriate to the structure, business and risks of the parent Bank and all its related entities.
    
2. The Board must exercise adequate oversight over the Group while respecting the independent legal and governance responsibilities that might apply to the individual entities. The Board and Senior Management must understand the Group organizational structures, both at the legal entity and business line, and the risks posed.
    

A Bank must have an appropriate Risk Governance Framework that provides a Bank-wide, and if applicable, Group-wide view of all material risks. This includes policies, processes, procedures, systems and controls to identify, measure, evaluate, monitor, report, and control or mitigate material sources of risk on a timely basis. The Bank’s risk management function must be independent of the management and decision-making of the Bank’s risk-taking functions and have a direct reporting line to the Board or the Board risk committee. Governance requirements for Risk Management are contained in separate Regulations and Standards issued by the Central Bank.

A Bank must have strong internal control frameworks and establish permanent, independent and effective compliance and internal audit functions. The Bank’s compliance function must have primary reporting obligations to the Chief Executive Officer and a right of direct access to the Board or the Board audit committee and/or Board risk committee. The Bank’s internal audit function must report to the Board or the Board audit committee. Governance requirements for internal control, compliance and internal audit are contained in a separate Regulation and Standards issued by the Central Bank.

A Bank must maintain appropriate records, prepare financial statements in accordance with the International Financial Reporting Standards (IFRS) and the instructions of the Central Bank, and publish annual financial statements bearing the opinion of an external auditor approved by the Central Bank. Governance requirements for financial reporting and external audit are contained in a separate Regulation and Standards issued by the Central Bank.

A Bank must establish appropriate policies and processes to assess, manage and monitor outsourced activities. Any outsourcing arrangements entered into by a Bank must be subject to appropriate due diligence, approval and ongoing monitoring in order to identify and mitigate risks inherent to outsourcing. Governance requirements for outsourcing are contained in a separate Regulation and Standards issued by the Central Bank.

1. A Bank must have a Board-approved compensation system that supports sound corporate governance and risk management, including appropriate incentives aligned with prudent risk-taking. Performance standards must be consistent with the long-term sustainability and financial soundness of the Bank.
    
2. The Board together with its compensation committee must approve the compensation of Senior Management and oversee the development and operation of compensation policies, systems and related control processes.
    
3. Compensation outcomes must be symmetric with risk outcomes. Compensation payout schedules must be sensitive to the time horizon of risks through arrangements that defer a sufficiently large portion of the compensation until risk outcomes become better known. The compensation framework must provide for mechanisms to adjust variable compensation, including through inyear adjustment, and malus or clawback arrangements, which can reduce variable compensation after it is awarded or paid.
    
4. Members of the Board must be compensated only with fixed compensation comprising the payment of an annual fixed amount and the reimbursement of directly related costs to the discharge of their responsibilities. Bonus or any incentive-based mechanisms based on the performance of the Bank must be excluded.
    
5. The compensation of Staff in the control functions of risk management, compliance and internal audit must be predominantly fixed to reflect the nature of their responsibilities and determined independently of the performance of the Bank. The variable compensation must be based on performance targets related to their functions and independent of the lines of business they monitor and control.
    
6. For Senior Management and Material Risk Takers, a proportion of the total compensation must be performance-based. Provisions must be included so that compensation can be reduced or reversed based on realized risks and violations of laws, Regulations, codes of conduct or other policies, before compensation vests.
    
7. The annual individual bonus for Senior Management and Material Risk Takers must not exceed 100% of the fixed proportion of his/her total compensation. A higher bonus of up to 150% would require approval by the Board. A bonus up to 200% would require approval by the General Assembly of the Bank.
    
8. The annual total bonus for all Staff must not exceed 5% of the Bank’s net profit. A higher bonus would require approval by the General Assembly of the Bank before disbursement, along with an attestation signed by all Members of the Board that the Bank is in compliance with all the Regulations issued by the Central Bank.
    

1. The Bank’s corporate governance policies and processes must ensure that timely and accurate disclosure is made on all material matters regarding the Bank, including the financial situation, performance, ownership, and governance of the Bank.
    
2. A Bank must publish an annual corporate governance-specific and comprehensive statement in a clearly identifiable section of its annual report. More frequent disclosure of corporate governance matters is encouraged.
    
3. A Bank must include in their corporate governance statement clear, comprehensive and timely information about their compensation practices to facilitate constructive engagement by all stakeholders. In particular, Banks must comply with the relating Pillar 3 disclosure requirements.
    
4. A Bank must include in their corporate governance statement details of transactions with related parties during the reporting period and the aggregate amount of all related party exposures at the end of the reporting period.
    
5. A Bank must include in their corporate governance statement an attestation signed by the chair of the Board (or in the case of a branch of a foreign Bank the Senior Management committee or equivalent), confirming that all internal policies required to ensure compliance with the Central Bank’s Regulations and Standards on corporate governance, risk management, internal controls, compliance, internal audit, financial reporting, external audit and outsourcing have been implemented and reviewed for adequacy by the Board within the last year. Otherwise, the attestation must specify those requirements not met and the date by which the Bank intends to comply fully.
    

1. A Bank offering Islamic financial services must ensure that its corporate governance framework adequately provides for:
    
   1. Internal Shari`ah review and Shari`ah governance reporting to ensure compliance with Shari`ah rules;
       
   2. The role of the internal Shari`ah control committee in the governance of the Bank;
       
   3. The rights of investment account holders and the processes and controls for protecting their rights in line with the general terms and conditions for accounts and Islamic financial services; and
       
   4. Transparency of financial reporting in respect of investment accounts.
       
2. A Bank offering Islamic financial services must ensure compliance with any direction or guidance issued by the Higher Shari`ah Authority with respect to its Shari`ah governance framework.
    
3. A Bank offering Islamic financial services must immediately notify the Central Bank if it becomes aware of any material information that may negatively affect the fitness and probity or independence of an internal Shari`ah control committee member.
    

1. Violation of any provision of this Regulation and the accompanying Standards may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank.
    
2. Without prejudice to the provisions of the Central Bank Law, supervisory action and sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or Members of the Board, providing for the interim management of the Bank, or barring individuals from the UAE banking sector.
    

1. The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.
    

1. This Regulation and the accompanying Standards repeal and replace the following previous Central Bank Circulars and Notices:
    
   1. Notice No 2203/2011 dated 5 April 2011, Membership of Board of Directors of Banks;
       
   2. Circular No 23/00 dated 22 July 2000, Required Administrative Structure in Banks; and
       
   3. Circular No 10/92 dated 24 November 1992, Senior Management Positions.
       
   
    

1. This Regulation and the accompanying Standards shall be published in the Official Gazette in both Arabic and English and shall come into effect one month from the date of publication.
    
2. A Bank must comply fully with the provisions of this Regulation and the accompanying Standards within 3 years from the date of its coming into effect.
    

1. These Standards form part of the Corporate Governance Regulation (Circular No. 83/2019). All Banks must comply with these Standards, which expand on the Regulation. These Standards are mandatory and enforceable in the same manner as the Regulation.

2. The Standards follow the structure of the Regulation, with each article corresponding to the specific article in the Regulation.

1. 1. Affiliate: An entity owned by another entity by more than 25% and less than 50% of its capital.
2. 2. Bank: Any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities.
3. 3. Board: The Bank’s board of directors.
4. 4. Central Bank: The Central Bank of the United Arab Emirates.
5. 5. Central Bank Law: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities.
6. 6. Chief Executive Officer: The most senior executive appointed by the Board.
7. 7. Conflict of Interest: A situation of actual or perceived conflict between the duty and private or other interests of a person, which could improperly influence the performance of his/her duties and responsibilities.
8. 8. Control Functions: The Bank’s functions that have a responsibility independent from management to provide objective assessment, reporting and/or assurance; this includes the risk management function, the compliance function and the internal audit function.
9. 9. Controlling Shareholder: A shareholder who has the ability to directly or indirectly influence or control the appointment of the majority of the Board of directors, or the decisions made by the Board or by the general assembly of the entity, through the ownership of a percentage of the shares or stocks or under an agreement or other arrangement providing for such influence.
10. 10. Corporate Governance: The set of relationships between the Bank’s management, Board, shareholders and other stakeholders which provides the structure through which the objectives of the Bank are set, and the means of attaining those objectives and monitoring performance. It helps define the way authority and responsibility are allocated and how corporate decisions are made.
11. 11. Duty of Care: The duty to decide and act on an informed and prudent basis with respect to the Bank. Often interpreted as requiring Members of the Board to approach the affairs of the Bank the same way that a “prudent person” would approach his/her own affairs.
12. 12. Duty of Confidentiality: The duty to observe confidentiality applies to all information of a confidential nature with which a Member of the Board is entrusted by the Bank or which is brought to his or her attention during or at any time after the carrying out of his/her assignment.
13. 13. Duty of Loyalty: The duty to act in the good faith in the interest of the Bank. The duty of loyalty should prevent individual Members of the Board from acting in their own interest, or the interest of another individual or group, at the expense of the Bank and shareholders.
14. 14. First-Degree Relatives: The individual’s parents, siblings and children.
15. 15. Fit and Proper Process: The evaluation of a Bank’s proposed members of the Board and Senior Management as to expertise and integrity. The specific fit and proper criteria are listed in article 2.13 of the Standards.
16. 16. Government: The UAE Federal Government or one of the governments of the member Emirates of the Union.
17. 17. Group: A group of entities which includes an entity (the ‘first entity’) and:
    1. a. any Controlling Shareholder of the first entity;
    2. b. any Subsidiary of the first entity or of any Controlling Shareholder of the first entity; and
    3. c. any Affiliate, joint venture, sister company and other member of the Group.
18. 18. Higher Shari`ah Authority: The Higher Shari`ah Authority that was established at the Central Bank by the Cabinet Resolution no. (102/ 1/ و 5) 2016.
19. 19. Independent Member of the Board: A Member of the Board who has no relationship with the Bank or Group that could lead to benefit which may affect his/her decisions. He/she must not be under any other undue influence, internal or external, ownership or control, which would impede the Member’s exercise of objective judgment. The Independent Member of the Board forfeits his/her independence in the cases specified in Article 3.4 of the Standards.
20. 20. Islamic Financial Services: Shari`ah compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products.
21. 21. Material Risk Takers: Staff whose work is deemed to have a significant impact on the overall risk profile of the Bank or the Group.
22. 22. Non-Executive Member of the Board: A Member of the Board who does not have any management responsibilities within the Bank, and may or may not qualify as an Independent Member of the Board.
23. 23. Pillar 3: Pillar 3 disclosure requirements – consolidated and enhanced framework issued by the Basel Committee on Banking Supervision in March 2017 and any subsequent revisions.
24. 24. Regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
25. 25. Related Parties: The Group and its Controlling Shareholder’s Members of the Board and Senior Management (and their First-Degree Relatives) and persons with control, joint control or significant influence over the Bank (and their First-Degree Relatives).
26. 26. Related Party Transactions: Include on-balance sheet and off-balance sheet credit exposures and claims as well as dealings such as service contracts, asset purchases and sales, construction contracts, lease agreements, derivative transactions, borrowings, and write-offs. The term transaction incorporates not only transactions that are entered into with related parties but also situations in which an unrelated party (with whom a Bank has an existing exposure) subsequently becomes a Related Party; disclosures must reflect all related party events and transactions for the financial period.
27. 27. Relatives: The individual’s father, mother, brother, sister, children, spouse, father-in-law, mother-in-law, and children of the spouse.
28. 29. Risk Appetite: The aggregate level and types of risk a Bank is willing to assume, decided in advance and within its risk capacity, to achieve its strategic objectives and business plan.
29. 30. Risk Limits: Specific quantitative measures that must not be exceeded based on, for example, forward looking assumptions that allocate the Bank’s aggregate risk appetite to business lines, legal entities or management units within the Bank or Group in the form of specific risk categories, concentrations or other measures as appropriate.
30. 31. Risk Governance Framework: As part of the overall approach to corporate governance, the framework through which the Board and Senior Management establish and make decisions about the Bank’s strategy and risk approach; articulate and monitor adherence to the risk appetite and risks limits relative to the Bank’s strategy; and identify, measure, manage and control risks.
31. 32. Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank, generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
32. 33. Subsidiary: An entity, owned by another entity by more than 50% of its capital, or under full control of that entity regarding the appointment of the Board of directors.
33. 34. Staff: All the persons working for a Bank including the members of Senior Management, except for the Members of its Board.

1. The Board must act in the best interests of its various stakeholders while meeting regulatory expectations. Treating customers fairly must be an integral part of all Banks’ good governance and corporate culture.

2. Members of the Board are responsible for the overall interests of the Bank. This applies to Members of the Board representing or appointed by an individual shareholder or group of shareholders. The Duty of Loyalty precludes individual Members of the Board acting in their own interest, or the interest of another individual or group, at the expense of the Bank, its depositors or shareholders. Depositors’ interests take precedence over shareholders’ interests.

3. The Members of the Board shall exercise their Duty of Care, Duty of Confidentiality and Duty of Loyalty to the Bank when carrying out their activities, which include, but are not limited to:

1. a. Actively engaging in the affairs of the Bank to ensure strategy and policies are implemented as designed as well as acting in a timely manner to protect the long-term interests of the Bank;
2. b. Overseeing the development of and approving the Bank’s business objectives and strategy, and monitoring their implementation;
3. c. Playing a lead role in establishing the Bank’s corporate culture and values;
4. d. Overseeing implementation of the Bank’s governance framework and periodically reviewing it to ensure that it remains appropriate in the light of material changes to the Bank’s size, complexity, business strategy, markets and regulatory requirements;
5. e. Establishing the Bank’s Risk Appetite, taking into account the competitive and regulatory landscape and the Bank’s long-term interests, risk exposures and ability to manage risk effectively;
6. f. Overseeing the Bank’s adherence to its Risk Appetite and Risk Limits;
7. g. Approving and overseeing the implementation of key policies including, but not limited to, credit, liquidity and the internal capital adequacy assessment process;
8. h. Approving the annual financial statements and requiring periodic independent review of critical areas of the business and internal controls;
9. i. Approving the selection of and overseeing the performance of Senior Management;
10. j. Overseeing the Bank’s approach to Board and Staff compensation, including monitoring and reviewing executive compensation and assessing whether it is aligned with the Bank’s culture and Risk Appetite; and
11. k. In the case of a Bank offering Islamic financial services, fully complying with Islamic Shari`ah rules and establishing a sound and effective Shari`ah governance framework with the key mechanisms and functionalities to ensure effective and independent Shari`ah oversight, as per the requirements set by the Central Bank and the Higher Shari`ah Authority.

4. The Members of the Board are responsible for the implementation of an effective risk management culture and internal control framework across the Bank and the Group. In order to promote a sound corporate culture, Members of the Board must establish the “tone from the top” by:

1. a. Setting and adhering to corporate values that create expectations that all business must be conducted in a legal and ethical manner, and overseeing the adherence to such values by Staff;
2. b. Promoting risk awareness within a strong risk culture, and setting the expectation that all Staff are responsible for ensuring the Bank operates within the established Risk Governance Framework, Risk Appetite and Risk Limits;
3. c. Ensuring that appropriate steps have been taken to communicate throughout the Bank the corporate values, professional standards and codes of conduct approved by the Board together with supporting policies; and
4. d. Ensuring that Staff are aware that appropriate disciplinary or other actions will follow unacceptable behaviors and transgressions.

5. The Board approved Risk Governance Framework must incorporate a “three lines of defence” approach including Senior Management of the business lines, the functions of risk management and compliance, and an independent and effective internal audit function. In the case of a Bank providing Islamic financial services, an independent and effective internal Shari`ah audit function reporting to the internal Shari`ah control committee must be in place.

6. The Risk Governance Framework may vary with the specific circumstances of the Bank, particularly its risk profile, size, business mix and complexity. Banks must incorporate the minimum requirements specified in the separate Regulations and Standards issued by the Central Bank on 1) Risk Management, 2) Internal Control, Compliance and Internal Audit and 3) Outsourcing into their Risk Governance Framework.

7. A Bank must have a written code of conduct that defines acceptable and unacceptable behaviors. It must explicitly prohibit illegal activity including fraud, breach of sanctions, money-laundering, anti-competitive practices, bribery and corruption, and the violation of consumer rights. It must make clear that Staff are expected to conduct themselves ethically and perform their jobs with skill, due care and diligence in addition to complying with laws, regulations and Bank policies.

8. The Bank’s corporate culture must recognize the critical importance of timely and frank discussion and escalation of problems to higher levels. Staff must be encouraged and must be able to communicate legitimate concerns about illegal, unethical or questionable practices confidentially and without the risk of reprisal.

9. The Board must oversee a whistleblowing policy mechanism and ensure that Senior Management appropriately addresses legitimate issues flagged through the whistleblowing mechanism. The Board is responsible for ensuring that Staff who raise concerns are protected from detrimental treatment or reprisals. The Board must oversee and approve how and by whom legitimate matters are investigated and addressed by an objective internal or external body, Senior Management, and/or by the Board itself.

10. The Board must have a formal written Conflict of Interest policy for its members. The policy must include, but is not limited to:

1. a. A Member of the Board’s duty to avoid, to the extent possible, activities that could create conflicts of interests or the appearance of conflicts of interests;
2. b. Examples of how conflicts can arise where serving as a Member of the Board;
3. c. A process for management of conflicts of interests by the Board or an ethics committee where one exists;
4. d. A review and approval process for Members of the Board before they engage in specific activities, such as serving on another Board, to ensure that such activities will not create a conflict of interest;
5. e. A process to prevent members from holding directorships in competing institutions;
6. f. A Member of the Board’s duty to promptly disclose any matter that may result, or has already resulted, in a conflict of interest;
7. g. A Member of the Board’s responsibility to abstain from voting on any matter where the Member of the Board may have a conflict of interest or where the Member of the Board’s objectivity or ability to properly fulfil duties to the Bank may be otherwise compromised;
8. h. Procedures to ensure that transactions with related parties are undertaken on arm’s length basis; and
9. i. The way the Board will deal with non-compliance with the Conflict of Interest policy.

11. The Board must provide oversight of Senior Management. It must hold members of Senior Management accountable for their actions and enumerate the consequences if those actions are not aligned with the Board’s expectations. This includes adhering to the Bank’s values, Risk Appetite and risk culture. Oversight by the Board should include, but is not limited to:

1. a. Monitoring Senior Management’s actions to ensure that they are consistent with the strategic objectives and policies approved by the Board and are aligned with its Risk Appetite;
2. b. Meeting regularly with Senior Management;
3. c. Critically reviewing and challenging explanations and information provided by Senior Management;
4. d. Setting appropriate performance and compensation standards for Senior Management consistent with the long-term strategic objectives and the financial soundness of the Bank;
5. e. Assessing whether Senior Management’s collective knowledge and expertise remain appropriate given the nature of the business and the Bank’s risk profile; and
6. f. Actively engaging in succession planning for the Chief Executive Officer and ensuring that appropriate succession plans are in place for Senior Management positions.

12. Senior Management must implement, consistent with the direction given by the Board, systems, processes and controls for managing the risks to which the Bank is exposed and for complying with laws, regulations and internal policies. This includes comprehensive and independent risk management, compliance and audit functions, as well as an effective overall system of internal controls.

13. The nomination committee must lead the process for identifying, assessing and selecting candidates for the Board and Senior Management. Fit and proper criteria must ensure that candidates:

1. a. Possess the necessary knowledge, skills, and experience;
2. b. Have a record of integrity and good repute;
3. c. Have sufficient time to fully discharge their responsibilities;
4. d. Provide for a collective suitability and added value to the Board;
5. e. Do not have any conflict of financial and non-financial interests; and
6. f. Have a record of financial soundness.

Before providing the no-objection for nominations, appointments or renewals, the Central Bank will conduct additional interview and/or background checks to ensure the fitness and probity of the candidates, including their ability to manage the time commitments required for their role in the Bank, and confirm the accuracy and completeness of the information and documentation provided by the Banks.

14. Branches of foreign Banks must establish local governance structures, such as a Senior Management committee or equivalent, that fulfill the responsibilities of a Board required by this Corporate Governance Regulation and Standards. Branches must ensure their Control Functions are operating effectively. Branches must establish Control Functions that are robust, report to the local management structures and are accountable to the Group’s heads of Control Functions. The local management structure of the branch must take steps as are necessary to help the branch meet its own corporate governance responsibilities in line with the Regulation. It is the responsibility of the local management structures to ensure that local legal and regulatory requirements are implemented and, where appropriate, make adjustments where the Group conflicts with a provision of this Regulation.

1. A Bank’s Board must be comprised of individuals with a balance of skills, diversity and expertise who collectively possess qualifications commensurate with the size, complexity and risk profile of the Bank. In assessing its collective suitability, the factors a Board should take into account include, but are not limited to:

1. a. Whether Members of the Board have a range of knowledge and experience in relevant areas and varied backgrounds to promote diversity of views;
2. b. Relevant individual areas of competence which may include, but are not limited to, capital markets, financial analysis, financial stability, financial reporting, information technology, strategic planning, risk management, compensation, regulation, corporate governance, management, accounting, audit and Shari`ah rules and principles in case of a Bank providing Islamic financial services;
3. c. Whether the Board collectively has a good understanding of local, regional and global economic and market forces and of the legal and regulatory environments applicable to the Bank’s operations; and
4. d. Whether individual Members of the Board can contribute to effective communication, collaboration and critical debate in the meetings of the Board and its committees.

2. The nomination committee must establish a policy to require at least 20% of candidates for consideration for the Board to be female. Information on the policy and actual figures of female candidates’ consideration and representation on the Board must be disclosed in the Bank’s annual corporate governance statement.

3. Members of the Board, individually and collectively, must be and remain qualified for their positions. Members of the Board must understand their oversight and corporate governance role and be able to exercise sound, objective judgement about the affairs of the Bank. Members of the Board must not have any conflict of interest that may impede their ability to perform duties independently and objectively, or be subject to any undue influence from:

1. a. Other persons/business;
2. b. Previous or current positions held; or
3. c. Personal, professional or other economic relationships with other Members of the Board or Senior Management, or
4. d. Other entities within the Group.

4. A Member of the Board shall lose his/her independence in the following cases:

1. a. If his/her tenure as an independent Member of the Board in the same Bank exceeds twelve (12) consecutive years from the date of his or her appointment. This provision applies equally to persons appointed by a Government shareholder;
2. b. If he/she, or any of his/her first-degree relatives, has worked as Staff of the Bank or its Subsidiaries during the past two (2) years;
3. c. If he/she has worked for, or is a partner, in a company that performs consulting works for the Bank or its Group or he/she has acted in such capacity during the past two (2) years;
4. d. If he/she has had any personal services contracts with the Bank or its Group during the past two (2) years;
5. e. If he/she has been affiliated with any non-profit organization that receives significant funding from the Bank or its Group;
6. f. If he/she, or any of his/her first-degree relatives, has been a partner or employee of the Bank’s auditor during the past two (2) years;
7. g. If he/she, or any of his/her first-degree relatives, has or had a direct or indirect interest in the contracts and projects of the Bank or its Subsidiaries during the last two (2) years, and the total of such transactions exceeds the lower of 5% of the Bank’s paid capital or of the amount of five million Dirhams or its equivalent amount in a foreign currency, unless such relationship is part of the nature of the Bank’s business and involves no preferential terms; and
8. h. If he/she and/or any of his/her first-degree relatives (individually or collectively) own directly or indirectly 10% or more of the Bank’s capital or is a representative of a shareholder who owns directly or indirectly more than 10% of Banks’ capital.

The provisions in items b to h above do not apply to Members of the Board appointed by a Government shareholder.

5. All nominated members for the Board must have sufficient competence, knowledge and experience to effectively carry out their duties and be subject to the Fit and Proper Process.

6. An ex-ante review and approval process must be completed before a Member of the Board accepts nomination to serve on another Board as permitted by this Regulation so as to ensure that the activity will not create a Conflict of Interest. In addition, each Member of the Board must confirm annually that he/she has sufficient time available to manage the time commitments required from the role in the Bank.

1. The chair of the Board must provide leadership to the Board and is responsible for its overall effectiveness. The chair must ensure that Board decisions are taken on a sound and well-informed basis, encourage and promote critical discussion and ensure that dissenting views can be freely expressed during the decision-making process. The chair must:

1. a. Ensure that the Board acts efficiently, fulfils its responsibilities and discusses all issues on a timely basis;
2. b. Approve the agenda of each Board meeting, ensuring that the content, organization, quality of documentation and time allocated to each topic allows for sufficient discussion and decision making;
3. c. Encourage all Members of the Board to fully and efficiently participate in the Board meetings in order to ensure that the Board acts in the best interests of the Bank;
4. d. Adopt suitable procedures to ensure efficient communication with the shareholders and the communication of their views to the Board;
5. e. Facilitate the effective participation of Independent Members of the Board and the development of constructive relations between individual Members; and
6. f. In the case of a Bank offering Islamic financial services, safeguard an effective independent oversight of Shari`ah compliance within the organizational framework.

2. The majority of the Members of the Board must be present in each Board and its committees’ meeting for a quorum. Attendance at meetings must be by physical presence or via audio or audio-videoconferencing subject to appropriate safeguards to preserve confidentiality and accuracy of deliberations.

3. The Board and its committees’ resolutions must be issued by the majority of votes. In the case of parity, the Chairman shall have a casting vote.

4. There must be effective communication and coordination between the audit committee and the risk committee to facilitate the exchange of information and effective coverage of all risks, including emerging risks, and any needed adjustments to the Bank’s Risk Governance Framework. The risk committee must, without prejudice to the tasks of the compensation committee, examine whether incentives provided by the remuneration system take into consideration risk, capital, liquidity and the likelihood and timing of earnings.

5. The Board must ensure that new Members of the Board participate in an appropriate induction program that must include an introduction to the strategy, structure, codes of conduct, main policies and material businesses of the Bank. In addition, the induction program must include an overview of the regulatory environment applicable to the Bank, including the requirements of the Central Bank Law, Regulations and Standards.

6. The Board must dedicate sufficient time, budget and other resources to an ongoing training and development program for the Members of the Board and draw on external expertise as needed. The Board must review annually its program for ensuring that Members of the Board acquire, maintain and enhance knowledge and skills relevant to their responsibilities.

7. The Board must structure itself in terms of effective composition, size and the use of committees so as to effectively carry out its oversight role and other responsibilities. This includes ensuring that the Board has the time and means to cover all necessary subjects in sufficient depth and have a robust discussion of issues.

8. The Board, or the Board nomination committee, must carry out at least annually an assessment of the Board as a whole, its committees, and individual members. This must include an independent assessment by an external third party at least once every five (5) years.

9. Annual assessments of the Board must include but are not limited to:

1. a. Reviewing the structure, size and composition of the Board as a whole and its committees;
2. b. Reviewing the effectiveness of Board governance procedures, determining where improvements are needed and making any necessary changes; and
3. c. Assessing the ongoing suitability of each Member of the Board, taking into account the fit and proper criteria and his/her performance on the Board.

10. Issues relating to the assessment of the performance of the Board as a whole include, but are not limited to:

1. a. Has the Board set clear performance objectives, and how well has it performed against these objectives?
2. b. Has the Board been effective in the strategy development process?
3. c. What has been the Board’s contribution to ensuring effective risk management?
4. d. Is the membership of the Board appropriate with the right mix of skills and knowledge?
5. e. Is the organizational structure and interaction between the Board and Senior Management working effectively?
6. f. How well has the Board responded to problems and challenges?
7. g. Is the Board dealing with the right issues?
8. h. Is the relationship between the Board and its committees working effectively?
9. i. Is the Board kept up to date with regulatory and market developments?
10. j. Is the Board provided with appropriate and timely information of the right depth and quality?
11. k. Are Board meetings of the right frequency and length to enable proper consideration of issues?
12. l. Is the content of the agenda appropriate for the size, nature and complexity of the Bank?
13. m. Are Board procedures adequate for effective performance?

11. Issues relating to the assessment of the performance of committees of the Board include, but are not limited to:

1. a. Does each committee have appropriate terms of reference, and how well has it performed against the terms of reference?
2. b. Does the committee keep the Board adequately informed of its work?
3. c. Is the relationship between the committee and the Board as a whole working effectively?
4. d. Is the membership of the committee appropriate with the right mix of skills and knowledge?
5. e. Is the interaction between the committee and Senior Management working effectively?
6. f. How well has the committee responded to problems and challenges?
7. g. Is the committee dealing with the right issues?
8. h. Are committee meetings of the right frequency and length to enable proper consideration of issues?

12. Issues relating to the assessment of the performance of individual Members of the Board include, but are not limited to:

1. a. Does the Member of the Board continue to meet the requirements of fitness and probity, and in the case of Independent Members of the Board, independence?
2. b. Has the Member of the Board actively contributed to the work of the Board, and if applicable, Board committees?
3. c. If newly appointed, has the Member of the Board participated in the Board’s induction program?
4. d. Has the Member of the Board participated in ongoing training on relevant issues?
5. e. Has the Member of the Board kept up to date with regulatory and market developments?

13. Branches of foreign Banks must establish local governance structures that meet the requirements of this Regulation and Standards. This includes, without limitation, the use of Senior Management committee and/or other committees to effectively carry out the oversight role and other responsibilities of the Board.

1. Senior Management is responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank. The organization, procedures and decision-making of Senior Management must be transparent and provide clarity on the role, authority and responsibility of the various positions within Senior Management.

2. Consistent with the direction given by the Board, Senior Management must implement business strategies, risk management systems, risk culture, processes and controls for managing the risks to which the Bank is exposed. This includes comprehensive and independent risk management, compliance and audit functions as well as an effective overall system of internal controls. Senior Management must recognize and respect the independent duties of the risk management, compliance and internal audit functions, and in the case of a Bank offering Islamic financial services, Shari`ah compliance and audit functions, and must not interfere with the exercise of such duties.

3. Senior Management must provide oversight of those they manage, and ensure that the Bank’s activities are consistent with the business strategy, Risk Appetite and the policies approved by the Board. Senior Management is responsible for delegating duties to Bank staff and must establish a management structure that promotes accountability and transparency throughout the Bank.

4. Senior Management must provide the Board with comprehensive and timely reporting to enable it to effectively discharge its responsibilities, including the oversight of Senior Management. Information Senior Management must regularly provide to the Board includes, but is not limited to:

1. a. Performance relative to the Bank’s strategy and Risk Appetite;
2. b. Performance against budget and other financial targets, and the financial condition of the Bank;
3. c. Breaches of Risk Limits or compliance rules categorized by frequency, scope and impact;
4. d. Internal control failures;
5. e. Legal or regulatory concerns;
6. f. Current and developing market conduct issues, including a semi-annual analysis on client complaints and inquiries;
7. g. Issues raised as a result of the Bank’s whistleblowing mechanism; and
8. h. Breaches of Shari`ah rules and principles in the case of Banks offering Islamic financial services.

5. An ex-ante review and approval process must be completed before a member of Senior Management accepts nomination to serve on a board as permitted by this Regulation so as to ensure that the activity will not create a conflict of interest. In addition, each member of Senior Management must confirm annually that he/she has sufficient time available to manage the time commitments required for their role in the Bank.

1. Transactions with Related Parties must not be undertaken on more favorable terms (e.g. in credit assessment, tenor, interest rates, fees, amortization schedules, requirement for collateral) than corresponding transactions with non-related counterparties.

2. Banks must have policies and processes in place to identify individual exposures to and transactions with Related Parties as well as the total amount of exposures, and monitor and report on them through an independent credit review or audit process. Exceptions to policies, processes and limits must be reported to the appropriate level of the Bank’s Senior Management and, if necessary, to the Board, for timely action. Senior Management must monitor Related Party Transactions on an ongoing basis, and the Board must also provide oversight of these transactions

3. The Board must ensure that transactions with Related Parties (including internal group transactions) are reviewed to assess risk and are subject to appropriate restrictions (e.g. by requiring that such transactions be conducted on arm’s length terms) and that corporate or business resources of the Bank are not misappropriated or misapplied.

4. Transactions with Related Parties and the write-off of related-party exposures exceeding specified amounts or otherwise posing special risks are subject to prior approval by the Bank’s Board. Members of the Board with conflicts of interest must be excluded from the approval process of granting and managing related party transactions. Banks must report any breaches promptly to the Central Bank. The Central Bank may determine additional capital and/or provisioning requirements to cover any such breaches.

5. Banks must have policies and processes in place to prevent persons benefiting from the transaction and/or persons related to such a person from being part of the process of granting and managing the transaction.

6. Banks must maintain a register of related parties and details for each related party transaction.

1. In order to fulfil its responsibilities, the Board of the Bank as a Controlling Shareholder must ensure:

1. a. There is a corporate governance framework at Group level with clearly defined roles and responsibilities taking into account the complexity and significance of the individual entities;
2. b. There is an appropriate Group management structure and internal control framework which takes into account the material risks to which the Group and its individual entities are exposed;
3. c. The Group’s corporate governance framework includes adequate policies, processes and controls and addresses risk management across the entities;
4. d. The Group’s corporate governance framework includes appropriate processes and controls to identify and address potential intragroup conflict of interest, such as those arising from intragroup transactions;
5. e. There are Board-approved policies and clear strategies for establishing new structures and legal entities, which ensure that they are consistent with the policies and interests of the Group;
6. f. There are effective systems in place to facilitate the exchange of information among the various entities, to manage the risks of the individual entities as well as of the Group as a whole, and to ensure effective control of the Group;
7. g. There are sufficient resources to monitor the compliance of all entities with all applicable legal, regulatory and governance requirements; and
8. h. There is an effective internal audit function, and in the case of a Bank offering Islamic financial services an effective internal Shari`ah audit function, which ensures audits are being performed on all Group entities and the Group itself.

2. While the Board of the Bank as a Controlling Shareholder must conduct strategic, group-wide risk management and prescribe corporate risk profiles, the individual entities’ management and boards must have appropriate input to their local or regional application and the assessment of local risks. It is the responsibility of the individual entities’ boards, or equivalent in the case of foreign branches, to assess the compatibility of the Group policy with local legal and regulatory requirements.

3. The Board and Senior Management must take into account the financial, legal, reputational and other risks to the Bank from operating through complex or non-transparent structures. Measures to avoid or mitigate these risks include, but are not limited to:

1. a. Avoiding setting up complicated structures that lack economic substance or business purposes;
2. b. Continually maintaining and reviewing appropriate policies, procedures and processes governing the approval and maintenance of those structures or activities, including fully vetting the purpose, the associated risks and the Bank’s ability to manage those risks prior to setting up new structures and initiating associated activities;
3. c. Having a centralized process for approving the creation of new legal entities and dissolution of dormant entities based on established criteria, including the ability to monitor and fulfil each entity’s regulatory, tax, financial reporting, governance and other requirements;
4. d. Establishing adequate procedures and processes to identify and manage all material risks arising from these structures, including lack of management transparency, operational risks introduced by interconnected and complex funding structures, intragroup exposures, trapped collateral and counterparty risk, ensuring that structures are only approved if the material risks can be properly identified, assessed and managed; and
5. e. Ensuring that the activities and structure are subject to regular internal and external audit reviews and Shari`ah audit review in case of providing Islamic banking services.

Governance requirements for risk management are contained in separate Regulation and Standards issued by the Central Bank.

Governance requirements for internal control, compliance and internal audit are contained in separate Regulation and Standards issued by the Central Bank.

Governance requirements for financial reporting and external audit are contained in separate Regulation and Standards issued by the Central Bank.

Governance requirements for outsourcing are contained in separate Regulation and Standards issued by the Central Bank.

1. The compensation committee is responsible for the overall oversight of management’s implementation of the compensation system for the entire Bank. In addition, the compensation committee must regularly monitor and review outcomes to assess whether the Bank-wide compensation system is creating the desired incentives for managing risk, capital and liquidity. It must have clear terms of reference, be properly constituted to exercise competent and independent judgement on the institution’s compensation policies and practices and work closely with the institution’s risk committee in the evaluation of incentives created by the compensation system. It must review the compensation plans, processes and outcomes at least annually. This must include an independent assessment by an external third party at least once every five (5) years.

2. Boards must have oversight of the compensation system for the whole institution, not just for Senior Management. The compensation structure must be in line with the strategy, Risk Appetite, objectives, values and long-term interests of the Bank. Incentives embedded within compensation structures should not incentivize Staff to take excessive risk.

3. Issues that the compensation committee of the Board must consider in overseeing the operation of Bank-wide compensation policies include, but are not limited to:

1. a. the ratio and balance between the fixed (basic salary and any routine employment allowances that are predetermined and not linked to performance) and variable components of compensation;
2. b. the nature of the duties and functions performed by the relevant Staff and their seniority within the Bank;
3. c. the assessment criteria against which performance-based components of compensation are to be awarded; and
4. d. the integrity and objectivity of the process of performance assessment against the set criteria.

4. The payment of the annual fixed amount to the Members of the Board should include a part relating to their service on the Board and another on the Board committees, with greater weighting applied to chairing committees. The payment may also include the value of other non-monetary benefits, e.g. insurance and healthcare. The contract signed by each Member of the Board must determine all the details of his/her compensation.

5. Negative financial performance or net loss reported by a Bank in a financial year should generally lead to a contraction of the Board’s total compensation. The Central Bank may impose additional reductions to the Board’s total compensation where the negative financial performance was due to non-compliance with Regulations, omission or error by the Board. In addition, a net loss reported by a Bank in a financial year is expected to lead to a contraction of the Staff bonus pool.

6. Staff in the Control Functions of risk management, compliance and internal audit and in the case of Banks offering Islamic financial services, Shari`ah compliance and audit, must be compensated in a way that makes their incentives independent of the lines of business whose risk taking they monitor and control. Instead, their performance measures and performance incentives must be based on achievement of their own objectives so as not to compromise their independence. This also applies to the compliance function staff embedded in independent support or control units.

7. If Staff in the Control Functions receives variable compensation, their total compensation must be made up of a higher proportion of fixed relative to variable compensation.

8. Banks must identify, both on a solo basis and at the Group level, the Staff who has the potential to take or commit the Bank to significant risk, including reputational and other forms, and consider the extent to which the structure of their compensation is effectively risk aligned (Material Risk Takers). The identification must be performed by means of an annual self-assessment and based primarily on control and influence over risk; i.e. Staff who receive incentive compensation and have an ability, either alone or as a member of a group, to take or influence risk that is significant to the Bank. These may include but not limited to:

1. a. Senior Management and key Staff (including but not limited to the Chief Executive Officer and other members of Senior Management who are responsible for oversight of the Bank’s key business lines and, if applicable, the Control Functions);
2. b. Staff whose duties involve the assumption of risk or the taking on of exposures on behalf of the Bank (including but not limited to proprietary traders, dealers, and loan officers);
3. c. Staff who engage in the design, sales and management of either securities or derivative products;
4. d. Staff who are incentivized to meet certain quotas or targets by payment of variable remuneration (including but not limited to those in marketing, sales and distribution functions);
5. e. Staff in the Control Functions, if applicable.

9. For Senior Management and Material Risk Takers:

1. a. a proportion of compensation must be variable and paid on the basis of individual, business-unit and Bank-wide measures that adequately measure performance;
2. b. a substantial portion of the variable compensation must be payable under deferral arrangements over at least three (3) years. These proportions should increase significantly along with the level of seniority and/or responsibility. For Senior Management and the most highly paid staff, the percentage of variable compensation that is deferred should be substantially higher;
3. c. a portion of variable compensation may be awarded in shares or equivalent ownership interests or share-linked or equivalent non-cash instruments in the case of non-listed Banks, as long as these instruments create incentives aligned with long-term value creation and the time horizons of risk. Awards in shares or share-linked instruments should be subject to an appropriate share retention policy; and
4. d. The remaining portion of the deferred compensation can be paid as cash compensation vesting gradually. In the event of negative contributions of the Bank and/or the relevant line of business in any year during the vesting period, any unvested portions should be clawed back, subject to the realised performance of the Bank and the business line.

10. Contractual payments related to a termination of employment should be examined to ensure there is a clear basis for concluding that they are aligned with long-term value creation and prudent risk-taking; prospectively, any such payments should be related to performance achieved over time and designed in a way that does not reward failure.

11. Banks are encouraged to follow the guidance provided by the Financial Stability Board in its issued Principles and Standards on Sound Compensation Practices as updated from time to time.

1. Disclosure in the annual corporate governance statement must include, but not be limited to:

1. a. Material information on the Bank’s objectives, organizational and governance structures and policies;
2. b. Major share ownership and voting rights;
3. c. Related Party Transactions;
4. d. The recruitment approach for the selection of Members of the Board and for ensuring an appropriate diversity of skills, backgrounds and viewpoints;
5. e. Education and experience of Members of the Board and key members of Senior Management;
6. f. Type and composition of Board committees and the number of times they met;
7. g. Incentive and compensation policy including the decision-making process used to determine the Bank-wide compensation policy, the most important design characteristics of the compensation system and aggregate quantitative information on compensation;
8. h. The individual compensation of the Members of the Board and key members of Senior Management;
9. i. Information on the policy and actual figures of female candidates’ consideration and representation on the Board;
10. j. Key points concerning its risk exposures and risk management strategies without breaching necessary confidentiality;
11. k. Information on the purpose, strategies, structures, and related risks and controls of material and complex or non-transparent activities;
12. l. Forward looking statements and foreseeable risk factors; and
13. m. In the case of Banks offering Islamic financial services, Annual Shari`ah Reports on the compliance with Shari`ah rules and the resolutions of the Higher Shari`ah Authority, or any other disclosures required by the Bank or the Higher Sharia Authority.

2. Where useful, Banks may make reference to the information contained in the Financial Statements’ Notes.

3. Qualitative and quantitative disclosure requirements on remuneration to be published annually in a Bank’s Pillar 3 report must include the following information for Senior Management and Material Risk-Takers:

1. a. Description of the main elements of their remuneration system and how the system has been developed;
2. b. Fixed and Variable remuneration awarded during the financial year;
3. c. Special Payments: Guaranteed bonuses, sign-on awards and severance payments; and
4. d. Deferred remuneration.

4. Boards should approve and publicly disclose a statement providing assurance that the corporate governance arrangements of their Banks are adequate and efficient.

1.1 The Central Bank seeks to promote development of the banking activities to ensure its effectiveness and efficiency. To achieve this, financial institutions that conduct all or part of their activities and businesses in accordance with the provisions of Islamic Shari'ah (Islamic Financial Institutions "IFIs") must have in place comprehensive and effective governance frameworks to enhance the compliance with Islamic Shari'ah provisions and principles ("Islamic Shari'ah") in those institutions. to ensure their resilience, and promote general financial stability.

1.2 IFIs must have Shari'ah governance policies and mechanisms that cover all their operations and activities to ensure they are compliant with Islamic Shari'ah.

1.3 This standard is issued pursuant to the powers vested in the Central Bank under the provisions of the Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities (the Central Bank Law).

1.4 Where this standard includes a requirement to provide information, or to take certain measures, or to address certain items listed as a minimum, the Central Bank may impose requirements, which are additional to the requirements provided in the relevant article.

2.1 The objective of this standard is to set the minimum requirements for IFIs to ensure their compliance with Islamic Shari'ah in all their objectives, activities, operations, and code of conduct.

2.2 This standard elaborates on the supervisory expectations of the Central Bank with respect to Shari'ah Governance for IFIs.

3.1 This standard applies to all IFIs. IFIs established in the UAE with Group relationships, including Subsidiaries, Affiliates, or international branches, must ensure that the Standard is adhered to on a solo and Group-wide basis.

3.2 This standard must be read in conjunction with the standards and resolutions issued by Higher Shari'ah Authority and notified to IFIs.

For the purposes of this standard, the following words and phrases shall have the meanings stated below.

1. Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank or IFI, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions. The term Senior Management includes the head of Islamic banking at the licensed financial Institutions that conduct part of their activities and businesses in accordance with the provisions of Islamic Shari'ah.
    
2. Independence: Ensuring that the Internal Shari'ah Supervision Committee is not subject to any form of undue influence when issuing resolutions and fatwas in accordance with the Shari'ah parameters, and ensuring that the Internal Shari'ah Control Division or Section and Shari'ah Audit Division or Section are also not subject to any form of undue influence. This should be carried out to strengthen the confidence of both shareholders and stakeholders in the IFIs compliance with Islamic Shari'ah.
    
3. External Shari'ah Audit: An annual assessment conducted by external body to inspect and assess the IFI's compliance with Islamic Shari'ah and the level of adequacy and effectiveness of the governance of Shari'ah supervision systems.
    
4. Internal Shari'ah Audit: regular process to inspect and assess the IFI's compliance with Islamic Shari'ah and the level of adequacy and effectiveness of IFI's Shari'ah governance systems.
    
5. Compliance with Islamic Shari'ah refers to compliance with Shari'ah in accordance with :
   a. resolutions, fatwas, regulations, and standards issued by the Higher Shari'ah Authority in relation to licensed activities and businesses of IFIs ("HSA's Resolutions"), and
   b. resolutions and fatwas issued by ISSC ("ISSC") of the respective IFI, in relation to licensed activities and businesses of such institution ("the Committee's Resolutions"), provided they do not contradict HSA's Resolutions.
    
6. Shari'ah Supervision: monitoring of IFI's compliance with Islamic Shari'ah in all its objectives, activities, operations, and code of conduct.
    
7. Subsidiary: An entity, owned by another entity by more than 50% of its capital, or under full control of that entity regarding the appointment of the Board of directors.
    
8. Affiliate: An entity owned by another entity by more than 25% and less than 50% of its capital.
    
9. Fatwas: juristic opinions on any matter pertaining to Shari'ah issues in Islamic finance, issued by HSA or ISSC.
    
10. Internal Shari'ah Supervision Division (or Section): a technical division (or section) in the IFI with a mandate to support the ISSC in its duties.
     
11. Internal Shari'ah Supervisory Committee ("ISSC"): a body appointed by the IFI, comprised of scholars specialized in Islamic financial transactions, which independently supervises transactions, activities, and products of the IFI and ensures they are compliant with Islamic Shari'ah in all its objectives, activities, operations, and code of conduct.
     
12. Board: IFI's board of directors
     
13. Group: A group of entities which includes an entity (the 'first entity') and:
    a. any Controlling Shareholder of the first entity;
    b. any Subsidiary of the first entity or of any Controlling Shareholder of the first entity; and
    c. any Affiliate, joint venture, sister company and other member of the Group.
     
14. Shari'ah Non-Compliance Risks: probability of financial loss or reputational damage that IFI might incur or suffer due to not complying with Islamic Shari'ah.
     
15. Confidential Information: information that is publicly unavailable and its disclosure is not allowed.
     
16. Code of Conduct: refers to the principles that are intended to govern the activities of IFI with regard to (a) protection of their customers' interest, and (b) market integrity (c) and internal work environment.
     
17. Islamic Financial Institutions (Institutions/IFIs): The CBUAE licensed financial Institutions that conduct all or part of their activities and businesses in accordance with the provisions of Islamic Shari'ah.
     
18. Higher Shari'ah Authority (HSA): is the Central Bank's Higher Shari'ah Authority for financial and banking activities.

5.1 The IFI must comply with Islamic Shari'ah in all of its goals, activities, operations and code of conduct at all times.

5.2 An IFI must have in place governance controls and mechanisms in accordance to its size and complexity of its operations to ensure compliance with Islamic Shari'ah in all of its activities, operations and code of conduct.

5.3 Branches of foreign licensed financial institutions that conduct all or part of their activities and businesses in accordance with the provisions of Islamic Shari'ah must adhere to this standard or establish equivalent arrangements to ensure regulatory comparability and consistency. The equivalent arrangement, if applicable, should include the matters related to general assembly, the Board and its Committees without contradicting the prevailing laws in the UAE. The equivalent arrangements shall be submitted to the CBUAE for approval.

5.4 The Shari'ah governance of IFIs must include the following as minimum requirements:

1. Stating the responsibility of the Board in regards to the IFI's compliance with Islamic Shari'ah, the oversight over the IFI, and establishing an adequate Shari'ah governance framework.
    
2. Identification of the senior management responsibilities related to the IFI's compliance with Islamic Shari'ah and for providing adequate resources for implementation of Shari'ah governance requirements to ensure that the IFI's business is carried out in compliance with Islamic Shari'ah.
    
3. Appointment of a qualified ISSC in accordance with the eligibility and competence requirements set out in this standard.
    
4. Establishment of Internal Shari'ah Control Division (or Section).
    
5. Establishment of Internal Shari'ah Audit division (or section).
    
6. Publication of the ISSC's resolutions regarding standard products, services, fees, and other basic mechanisms governing IFIs operations, including late payment fees and the commitment to donate it, or awards granted by the IFI, and other essential matters.
    
7. Providing training and awareness programs related to compliance with Islamic Shari'ah in the IFI, this should include all levels in the organization.
    

5.5 This standard must be implemented through a set of policies and procedures that outline the structure, roles, responsibilities, accountability, scope and duties of different functions, and reporting lines and communication channels between different functions with regard to the IFI's compliance with Islamic Shari'ah.

5.6 The IFI must spread awareness regarding Islamic finance and boost the culture of compliance with Islamic Shari'ah within the IFI, including workshops for the members of the Board and senior management on Islamic financial transactions and compliance with Islamic Shari'ah.

The Central Bank seeks to promote the effective and efficient development and functioning of the banking system. To this end, it is necessary to regulate and supervise Major Acquisitions proposed and undertaken by banks and banking groups.

In introducing this Regulation, the Central Bank intends to ensure that Banks adopt prudent approaches to Major Acquisitions within a Regulatory framework in line with leading international practices.

This Regulation is issued pursuant to the powers vested in the Central Bank under the Central Bank Law (Decretal Federal Law No. (14) of 2018).

Where this Regulation includes a requirement to provide information or to take certain measures, or to address certain items listed at a minimum, the Central Bank may impose requirements that are additional to the listing provided in the relevant Article.

The onus is on the Board to demonstrate that it has implemented a comprehensive approach to Major Acquisitions. Banks are encouraged to adopt leading practices that exceed the minimum requirements of the Regulation.

The objective of this Regulation to establish a prudential framework for evaluating Banks’ approaches to Major Acquisitions, with a view to:

1. Ensuring the soundness of Banks; and
2. Contributing to financial stability and the protection of retail customers

This Regulation applies to all Banks operating in the UAE. Banks established in the UAE with significant group relationships, including Subsidiaries, Affiliates, or international branches, must ensure that the Regulation is adhered to on a solo and group-wide basis.

1. Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
    
2. Bank: Any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities as defined in Article 65 of the Central Bank Law.
    
3. Board: The Bank’s board of directors.
    
4. Central Bank: The Central Bank of the United Arab Emirates.
    
5. Central Bank Law: Decretal Federal Law No. (14) of 2018 regarding the Central Bank & Organisation of Financial Institutions and Activities as amended or replaced from time to time.
    
6. Central Bank regulations: Any regulation, resolution, circular, rule, standard or notice issued by the Central Bank.
    
7. Islamic Financial Services: Shari`ah compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products (Islamic Windows).
    
8. Major Acquisition: An acquisition or investment by a Bank (where assets are being acquired, including shares but not including debt (except convertible debt), the aggregate amount (in one juridical person) of which exceeds 5% of Total Regulatory Capital, or which is deemed in advance by the Central Bank to be a Major Acquisition.
    
9. Notification Acquisition: An acquisition or investment by a Bank (where assets are being acquired, including shares but not including debt), the amount of which does not meet the criteria for a Major Acquisition, but which does exceed 1% of Total Regulatory Capital.
    
10. Purchase Price: Gross amount.
     
11. Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
     
12. Subsidiary: an entity (the 'first entity') is a subsidiary of another entity (the ‘second entity’) if the second entity:
     
    1. holds a majority of the voting rights in the first entity;
        
    2. is a shareholder of the first entity and has the right to appoint or remove a majority of the board of directors or managers of the first entity;
        
    3. is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity;
        
    4. Or:
       if the first entity is a subsidiary of another entity which is itself subsidiary of the second entity
        
13. Total Regulatory Capital: The sum of a Bank’s Common Equity Tier 1, Additional Tier 1 and Tier 2 capital.

1. A Bank shall not acquire any other institution, regardless of its type of activity, nor transfer any part of its liabilities to another person, without obtaining the Central Bank’s prior approval.
    
2. A Bank must obtain written approval from the Central Bank prior to completing a Major Acquisition. An application for Central Bank approval must provide at a minimum:
    
   1. A detailed description and analysis of the proposed Major Acquisition including the consideration and value received, funding, and projected impact on the financial position, income statement, and prudential requirements;
       
   2. Projected impact on the Bank, and if applicable group business model, pro-forma statements of the combined entity, the potential impact on market share and competitive dynamics, customer access, product and services, risk profile, governance (including reporting lines), risk management, internal controls, internal audit, information systems and human resources;
       
   3. Due diligence report and other relevant documents, including those provided to the Board as part of the Bank’s internal approval process, Banks should consider obtaining Central Bank no objection before entering the due diligence process;
       
   4. The valuation methodology used to price the Major Acquisition;
       
   5. An explanation of how the Major Acquisition transaction meets the criteria set out in Article 5 of this Regulation; and
       
   6. Any other information necessary to enable the Central Bank to reach an informed decision on the merits of the application.
       
3. Banks must ensure that at all times they do not hold shares (and convertible debt) in commercial companies beyond a limit of 10% of their Total Regulatory Capital.
    
4. This Regulation does not apply to the purchase of a Subsidiary or Affiliate. Banks are required to seek Central Bank approval separately for any purchases of a commercial entity’s shares which would result in that commercial entity becoming a Subsidiary or Affiliate of the Bank. Where a Bank is fully acquiring or merging with another entity, the Central Bank may approve the transaction beyond the 10% limit.

1. The Board is responsible for establishing adequate policies and procedures to ensure that the risks inherent in Major Acquisitions are identified, understood and mitigated to the extent possible. At a minimum, policies and procedures must require:
    
   1. a) Approval by the Board; and
       
   2. b) Reporting that enables the Board and senior management to monitor and manage the risks on an ongoing basis.
       
2. Acquisitions, purchase of all or part of a business, or other changes to Bank or group structure may lead to increased risks for the Bank, or if applicable, group. For this reason, all Major Acquisitions must be approved by the Board, in accordance with the Board-approved policy. Elements of the review by the Board, of a Major Acquisition must include, but are not limited to the assessment of:
    
   1. a) Risks and impacts on the Bank’s capital, income, liquidity, overall financial position and compliance with prudential requirements under a variety of scenarios, particularly with more pessimistic assumptions than in the baseline case;
       
   2. b) Risks and impacts on existing customer exposures, documentation and services;
       
   3. c) The extent to which the Bank’s business lines, risk management, legal and regulatory compliance and information technology functions have the necessary expertise, systems and other tools to measure and manage the associated risks.

1. The Central Bank may require from any source whatsoever, such information and perform such investigation as it considers reasonably necessary to evaluate an application, to which end the Central Bank may appoint an agent deemed suitably qualified by the Central Bank
    
2. A Bank, which is in possession of information or documentation relevant to a Central Bank review, must present promptly such information or documentation to the Central Bank, or its agent
    
3. A person who provides the Central Bank with false, fraudulent, fictitious, materially misleading, or materially incorrect information in relation to an application may be determined by the Central Bank not to be a fit and proper person and thus precluded from being a member of the Senior Management or Board of a Bank

1. A Bank must demonstrate to the satisfaction of the Central Bank that the proposed Major Acquisition would not expose the Bank to undue (prudential and/or consumer protection) risks, hinder effective supervision, or the implementation of corrective measures in the future, including an orderly resolution of the bank, and that the Bank has adequate financial, managerial and organizational resources for the transaction.
    
2. When the proposed Major Acquisition is to be undertaken by a subsidiary or affiliate of the Bank, the Bank must demonstrate to the satisfaction of the Central Bank that it has the ability to manage any risks arising from the proposed Major Acquisition and that it would not expose the Bank to undue risk, hinder effective supervision, or the implementation of corrective measures in the future, including an orderly resolution of the Bank.
    
3. The Central Bank will consider each application on its own merits, applying the criteria set out in the Regulation
    
4. When the proposed Major Acquisition is outside the U.A.E., the Central Bank requires more enhanced due diligence to be undertaken by the Bank which includes detailing of the political, economic and legal risks of the overseas jurisdiction in question, including country regulations and related authorities’ reputation. Due diligence should also cover market environment with respect to macroeconomic development, and the subsequent impacts it may have, as per Articles 2(2) and 3(1) of this Regulation.
    
5. The Central Bank will also consider whether the authorities in the host country perform supervision effectively and whether the Central Bank will be able to exercise supervision on a consolidated basis. The Central Bank may not approve a transaction if bank secrecy or other laws, or any other factors, would impair effective consolidated supervision.

1. The Central Bank may approve the application, whether unconditionally or subject to such conditions, as it may deem necessary; or refuse the application, in which event the Central Bank will inform the applicant of the reasons for the refusal. A Bank shall be notified of the Central Bank’s decision within the period set out in Article 100 of the Central Bank Law.
    
2. The Central Bank will not make a decision on an application unless it has received all of the information specified in this Regulation as well as any other information the Central Bank may determine is necessary for the review.

1. A Bank must make a written notification to the Central Bank, detailing any acquisition which meets the definition of a Notification Acquisition within thirty (30) days after the transaction has been made. At a minimum the notification should cover, a description of the transaction, the rationale, details of the approval authority within the bank and the calculation of the percentage of Total Regulatory Capital based on the most recent audited financial statements.

1. Should the Central Bank determine that it had approved a Major Acquisition based on an application containing false, fraudulent, fictitious, or in any other way materially misleading or incorrect information, the Central Bank may withdraw its approval and reject the application, or modify its approval through the imposition of one or more conditions, or require the reversal of the transaction.

1. Banks offering Islamic Financial Services must ensure that any Major Transactions they undertake which fall under the scope of this regulation are done so in accordance with the principles of Islamic Shari’ah and any relevant Higher Shari’ah Authority resolutions/fatwas.

1. A Bank must provide the Central Bank with such information as is prescribed in this Regulation or may be required by the Central Bank.
    
2. A Bank must immediately notify the Central Bank when it becomes aware of any new or additional information, which has a material impact on a proposed Major Acquisition.

1. Violation of any provision of this Regulation and any accompanying Standards may be subject to supervisory action and administrative & financial sanctions as deemed appropriate by the Central Bank.
    
2. Supervisory action and administrative & financial sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of the Bank, imposition of fines or barring individuals from the UAE banking sector.

1. The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.

1. This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one (1) month from the date of its publication.

The Central Bank seeks to promote the effective and efficient development and functioning of the banking system. To this end, it is necessary to ensure the suitability of Banks’ significant and controlling shareholder/s.

In introducing this Regulation, the Central Bank intends to ensure that the transfer of significant shareholding is controlled in line with leading international practices.

This Regulation is issued pursuant to the powers vested in the Central Bank under the Central Bank Law (Decretal Federal Law No. (14) of 2018)¹.

Where this Regulation includes a requirement to provide information or to take certain measures, or to address certain items listed at a minimum, the Central Bank may impose requirements that are additional to the listing provided in the relevant Article.
 

¹ Article 95 of the law prohibits persons from holding controlling interests or increasing controlling interests in any licensed financial institutions unless Central Bank prior approval is obtained. Article 95 also confers powers on the Central Bank’s Board of directors to issue regulations relating to interests and instances of control.

The objective of this Regulation is to establish the minimum acceptable standards for Banks’ approach to transfer of significant ownership with a view to:

1. Ensuring the soundness of banks; and
2. Contributing to financial stability and protection of retail customers

This Regulation applies to all Banks operating in the UAE and all of the bank’s current and potential shareholders. Banks established in the UAE with significant Group relationships, including Subsidiaries, Affiliates, or international branches, must ensure that the Regulation is adhered to on a solo and Group-wide basis.

The branches of international Banks operating in the UAE are required to only notify the Central Bank when there is any change in significant/controlling shareholders (as per the definitions included in this Regulation) of the parent entity.

1. Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
    
2. Bank: Any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities.
    
3. Beneficial shareholder: The natural person exercising or entitled to the rights of a particular direct shareholding.
    
4. Beneficial shareholding: The particular direct shareholding over which a natural person exercises, or is entitled to exercise, the rights thereof, regardless of whether the natural or legal person is a direct shareholder.
    
5. Board: The Bank’s board of directors.
    
6. Central Bank: The Central Bank of the United Arab Emirates.
    
7. Central Bank Law: Decretal Federal Law No. (14) of 2018 regarding the Central Bank & Organization of Financial Institutions and Activities.
    
8. Control: the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
    
9. Controlling shareholder: One or more beneficial shareholder/s who, directly or indirectly, singly or acting in concert:
    
   1. a) own/s or control/s more than 50 percent of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares;
       
   2. b) control/s more than 50 percent of the votes related to the sum of the issued ordinary shares and financial instruments convertible into ordinary shares;
       
   3. c) control/s the election of the majority of the directors and/or directs and determine/s the decisions of the board of directors; or
       
   4. d) exercise/s a controlling influence over the policies, strategies, governance, management or financial affairs of a bank, as determined by the Central Bank in its sole discretion.
       

   In determining the votes which can be exercised at a shareholders’ meeting, all votes related to ordinary shares and all votes related to other instruments which are convertible into ordinary shares must be included.

10. Controlling shareholding: The issued ordinary shares and financial instruments convertible into ordinary shares held by Controlling Shareholders as defined in this Regulation
     
11. Group: A group of entities which includes an entity (the 'first entity') and:
     
    1. a) any Controlling Shareholder of the first entity;
        
    2. b) any Subsidiary of the first entity or of any Controlling Shareholder of the first entity; and
        
    3. c) any Affiliate
    4.  
12. Significant Shareholder: one or more beneficial shareholder/s who, directly or indirectly, singly or acting in concert;
     
    1. a) own/s or control/s a shareholding equal to or exceeding five percent (5%) of the sum of the issued ordinary shares and financing instruments convertible into ordinary shares;
        
    2. b) control/s votes equal to or exceeding five percent (5%) of the sum of the votes related to the issued ordinary shares and financial instruments convertible into ordinary shares.
        
13. Significant shareholding: The issued ordinary shares and financial instruments convertible into ordinary shares held by Significant Shareholder. For the avoidance of doubt, a Controlling Shareholder is also a Significant Shareholder, and a Controlling Shareholding is also a Significant shareholding.
     
14. Islamic Financial Services: Shari'ah compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products (Islamic Windows).
     
15. Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer, and heads of the compliance and internal audit functions.
     
16. Subsidiary: an entity (the 'first entity') is a subsidiary of another entity (the ‘second entity’) if the second entity:
     
    1. holds a majority of the voting rights in the first entity;
        
    2. is a shareholder of the first entity and has the right to appoint or remove a majority of the board of directors or managers of the first entity;
        
    3. is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity;
    4. Or:
       if the first entity is a subsidiary of another entity which is itself subsidiary of the second entity.

1. The Board is responsible for ensuring that a bank establishes and maintains an up to date shareholder register, and that written records are established and maintained in relation to all the bank’s shareholders and their shareholdings.
    
2. Banks are required to have in place policies and procedures to ensure that all Significant and Controlling Shareholders are identified and recorded in writing in the shareholders register.

1. A person may not obtain or divest, directly or indirectly, a shareholding in a Bank equal to or exceeding five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares, without first having applied for and received the prior written approval of the Central Bank.
    
2. A person may not increase, by any margin, a shareholding in a bank above five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares that they may already hold, without first having applied for and received the prior written approval of the Central Bank
    
3. Prior written notice to the Central Bank is required if a person intends, in relation to a bank, to:
    
   1. obtain or divest a Significant or Controlling Shareholding; or
       
   2. obtain or divest the right to exercise voting rights in relation to a Significant or Controlling Shareholding; or
       
   3. increases their shareholding to a level which would result in his aggregate holding qualifying as a Significant or Controlling Shareholding; or
       
   4. increases the number of voting rights they are entitled to exercise to a level constituting him as a Significant Shareholder or Controlling Shareholder.
       
4. Should a person obtain or divest a shareholding exceeding five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares in a bank without prior written Central Bank approval, he is required immediately to apply for Central Bank approval. Unless and until Central Bank approval has been obtained, this shareholder is prohibited, in relation to that part of his shareholding which exceeds five percent (5%) of the bank’s issued ordinary shares (excess shareholding), from exercising any related voting right and receiving any related dividend. The Board must ensure that these prohibitions are enforced, and that any related dividends are retained by the bank until a final decision has been made by the Central Bank.
    
5. A person who obtained a shareholding exceeding five percent (5%) of the sum of the issued ordinary shares and financial instruments convertible into ordinary shares in a bank without prior written Central Bank approval may not dispose of the shareholding without the prior written approval and under the direction of the Central Bank.
    
6. No person is permitted to obtain or increase a Significant or Controlling Shareholding in a Bank, whether held directly or indirectly, unless the person obtains in advance the Central Bank’s prior written approval. Similarly, no person is permitted to obtain or increase voting rights in a bank up to or above a level equivalent to that of a significant or controlling shareholding unless the person obtains in advance the Central Bank’s prior written approval.
    
7. Banks must notify the Central Bank where a shareholding of (1%) one percent or more of the issued ordinary shares and financing instruments convertible into ordinary shares is obtained.

1. The Central Bank may, when it, in its sole discretion considers this to be the substance of the matter, deem that one or more beneficial shareholder/s, singly or acting in concert, is or constitutes a Significant Shareholder or Controlling Shareholder, as the case may be. In this event, the corresponding shareholding/s held will be deemed to constitute a Significant Shareholding/s or a Controlling shareholding/s, as the case may be.
    
2. Banks are required to provide the Central Bank with sufficient information to identify those persons who control the exercise of a significant or controlling number of voting rights. The Board is responsible for ensuring the Bank’s compliance with these reporting requirements.

1. An application for Central Bank approval must be in such form and be accompanied by such information as the Central Bank may require.
    
2. An application for Central Bank approval must contain the following information and address the following issues:
    
   1. a) A duly completed questionnaire in the form prescribed by the Central Bank which will include requirements to demonstrate the shareholders appropriate financial standing and reputation;
       
   2. b) A detailed exposition of the applicant’s shareholding/s in the Bank, including all direct and indirect shareholdings, setting out also the names of any nominee shareholder/s and shareholding/s. In addition, the same information must be provided in respect of the shareholding/s in the Bank of any party or parties acting in concert with the applicant;
       
   3. c) Detailed financial information of the applicant entity covering a period of at least 3 years prior to the application date;
       
   4. d) Any other information reasonably necessary for the Central Bank to reach a decision on the merits of the application.
   5.  
3. The Central Bank considers each application on its own merits, on a case-by-case basis. The applicant must demonstrate to the satisfaction of the Central Bank that it currently meets the criteria and in future will continue to meet the criteria to be a significant or controlling shareholder of a bank.
    
4. An application for Central Bank approval must be made by and in the name of the (ultimate) beneficial shareholder. Breach of this requirement invalidates any Central Bank approval issued in relation to such an application, and any person involved with such an application is deemed not to be a fit to be a significant or controlling shareholder, officer or director of a bank.
    
5. Any action or inaction which conceals the true identity of a beneficial shareholder intending to obtain or holding a significant or controlling shareholding invalidates any Central Bank approval issued in relation to that application. Any person involved with such an application is deemed not to be a fit and proper person to be a significant or controlling shareholder, officer or director of a bank.
    
6. A person who provides the Central Bank with false, fraudulent, fictitious, materially misleading or materially incorrect information in relation to an application is deemed not to be a fit and proper person to be a significant or controlling shareholder, officer or director of a bank.

1. The Central Bank may approve the application for approval to obtain or divest a Significant or Controlling Shareholding, whether unconditionally or subject to such conditions as it may deem necessary, or refuse the application, in which event the Central Bank must inform the applicant of the reasons for the refusal.
    
2. The Central Bank may require information from any source and perform such investigation as it considers reasonably necessary to evaluate an application. Banks must provide any information deemed relevant to an investigation to the Central Bank.
    
3. The Central Bank will not make a decision on an application unless it has received all the information specified in this Regulation as well as any other information the Central Bank may consider necessary for its review.
   
   An applicant must demonstrate to the satisfaction of the Central Bank that the resulting ownership structure will not impede effective Central Bank supervision of the bank and its group (where applicable), or the discharge of the Central Bank’s financial stability mandate, and that the beneficial shareholder is fit and proper.
   
   Where a financial institution (whether domestic or foreign) proposes to obtain or divest a Significant or Controlling Shareholding in a Bank, the Central Bank will consider whether:
    
   1. a) The institution is supervised by an authority which discharges its mandate in line with international practises;
       
   2. b) The institution’s supervisor applies consolidated or cross-border supervision in relation to the institution;
       
   3. c) The institution’s supervisor will include the acquired entity when performing consolidated and cross-border supervision in relation to the institution; and
       
   4. d) The institution’s supervisor has provided the Central Bank with a written confirmation of its consent or no objection to the proposed transaction.

1. Should the Central Bank determine that it had approved a change in ownership of a significant shareholding based on an application containing misleading or incorrect information, the Central Bank may withdraw its approval and reject the application, modify its approval through the imposition of one or more conditions, or require the shareholder to dispose of the shareholding subject to the conditions set by the Central Bank.
    
2. Until an unapproved significant shareholding is divested in accordance with the conditions prescribed by the Central Bank, the shareholder is prohibited, in relation to that part of their shareholding which exceeds five percent (5%) of the bank’s issued ordinary shares (Excess Shareholding), from exercising any related voting rights, and receiving any related dividend. The Board must ensure that these prohibitions are enforced, and that any related dividends are retained by the bank until a final decision has been made by the Central Bank.
    
3. The requirement that a Significant or Controlling Shareholder be fit and proper is a continuing requirement. The Central Bank may revoke an approval of a Significant or Controlling Shareholder if that shareholder is no longer fit and proper or the Central Bank determines that any of the information provided as part of an application was false, fraudulent, and fictitious or in any other way materially misleading or incorrect.

1. The Bank must provide the Central Bank with such information as is required in relation to Significant Shareholder/s or Controlling shareholder/s. Failure to comply constitutes a breach of the continuous requirements of this Regulation.
    
2. Unless and until the situation is regularized to the satisfaction of the Central Bank, a shareholder failing to comply with the reporting requirements of this Regulation must dispose of that part of their shareholding which exceeds five percent (5%) of the Bank’s issued ordinary shares (Excess Shareholding) as prescribed by the Central Bank. They are also prohibited, in relation to such Excess Shareholding, from exercising any related voting right or receiving any related dividend. The Board must ensure that these prohibitions are enforced and that any related dividends are retained by the bank until a final decision has been made by the Central Bank.
    
3. A Bank must provide the Central Bank with such information regarding its shareholders as is prescribed in this Regulation or may be required by the Central Bank.
    
4. A Bank must immediately notify the Central Bank when it becomes aware of a change or proposed change in a Significant Shareholder or Significant Shareholding, or in a Controlling Shareholder or Controlling Shareholding.
    
5. A Bank must immediately notify the Central Bank when it becomes aware of any material information which may negatively affect the suitability of a Significant or Controlling Shareholder.
    
6. A foreign bank branch must immediately notify the Central Bank upon becoming aware of any change or proposed change in controlling shareholding or significant shareholding of its parent entity, and provide the Central Bank with such relevant information as it may require.
    
7. Nominee shareholders are required, upon request by the Bank, to provide the Bank with the name and any other required details of the beneficial shareholder.
    
8. Banks must take into account the identity of beneficial shareholders when reporting to the Central Bank on significant and controlling shareholder/s and Shareholding/s as required by this Regulation.
    
9. Banks must obtain from all significant shareholders and controlling shareholders the information required to be submitted to the Central Bank on an annual basis.

1. Banks offering Islamic Financial Services must ensure that any Major Transactions they undertake which fall under the scope of this regulation are done so in accordance with the principles of Islamic Shari’ah and any relevant Higher Shari’ah Authority resolutions/fatwas.

1. Violation of any provision of this Regulation and any accompanying Standards may be subject to supervisory action and administrative & financial sanctions as deemed appropriate by the Central Bank.
    
2. Supervisory action and administrative & financial sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of the Bank, imposition of fines or barring individuals from the UAE banking sector.

1. The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.

1. This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one (1) month from the date of its publication.

The Central Bank Law stipulates that the Board of Directors of the Central Bank determines the conditions and controls for ownership of shares of Banks incorporated in the UAE and shareholdings contribution in their capital and, in all cases, the national shareholding must not be less than sixty percent (60%).

The objective of this Regulation is to ensure that national shareholding remains in compliance with the Central Bank Law at all times. Banks must take all reasonable measures to ensure compliance with the minimum national shareholding requirement as determined by the Board of Directors of the Central Bank. The measures referred to in article 3.1 of this Regulation, encompass at a minimum (if and when applicable) that Banks schedule the matter for a general assembly meeting and/or make necessary amendments in their Articles of Association, and/or provide a reasoned voting advice.

This Regulation applies to all Banks incorporated in the UAE.

1. Bank: Any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other Licensed Financial Activities.
    
2. Central Bank: The Central Bank of the United Arab Emirates.
    
3. Central Bank Law: Decretal Federal Law No. (14) of 2018 regarding the Central Bank & Organization of Financial Institutions and Activities and its amendments, or replacement from time to time.
    
4. Regulation of Significant Shareholder: Transfer of Significant Shareholding Regulation 05/2020 of 15 April 2020 on the transfer of significant shareholding.
    
5. State: United Arab Emirates “UAE”.

In all cases, the national shareholding percentage should not be less than sixty percent (60%) of the capital of the banks incorporated in the State. Natural persons owning this percentage must be citizens of the State. The percentage of ownership of the State citizens in a juridical person is calculated as per their shareholding in it.

1. The board of directors and shareholders of a Bank shall ensure that national shareholding is in accordance with the minimum requirement set out in Article 2 of this Regulation and shall take all reasonable measures to achieve compliance with this minimum requirement and the requirements of the Regulation of Significant Shareholder.
    
2. The board of directors of a Bank shall ensure that voting decisions of a shareholder, or shareholders, at a general assembly meeting comply fully with the Central Bank Law.

Banks must inform the Central Bank at the time of the invitation by the Bank’s board of directors to a general assembly meeting when a proposed shareholding change is on the agenda.

The Central Bank may send one or more representatives to attend a general assembly meeting when a proposed shareholding change is on the agenda, without having any right to vote. The presence of such representatives shall be stated in the minutes of meeting.

1. The Central Bank may take all measures it deems appropriate to maintain conduct of operations of Banks, within the frameworks and limits set by the Board of Directors of the Central Bank.
    
2. The Central Bank may:
   
   a. Request to hold a meeting of a general assembly of the Bank to discuss any issue the Central Bank deems important.
   
   b. Request to include any item that the Central Bank deems necessary into the agenda of a general assembly meeting of the Bank.
   
   c. Stop the implementation of any decision issued by a general assembly of the Bank in the event that it violates the laws or regulations in force.

Violation of this Regulation may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank.
Without prejudice to the provisions of the Central Bank Law, supervisory action and sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of the members of the board, providing for the interim management of the Bank, or barring individuals from the UAE banking sector.

Violation of Article 3.2 of this Regulation will render that shareholder(s)’ vote unlawful as the expected interests are not commensurate with the prejudice sustained by the Bank and/or other shareholder/s.

The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.

This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one (1) month from the date of its publication.