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Article (10) Permitted activities

C 3/2023 Effective from 29/9/2023
10.1A company can apply for a License to conduct one or more of the following types of activities:
a.Retail finance, including personal loans, credit cards, vehicle loans and Short-Term Credit;
b.Mortgage finance, including residential mortgages and commercial mortgages;
c.Wholesale finance, including loans to large corporate borrowers, small and medium-sized enterprises, microfinancing, finance and operating leasing and wage protection schemes;
d.Pre-paid cards; and
e.Distribution of third party products as an agent; provided that the Finance Company received approval from the relevant competent authority for the distribution of the third party products concerned.
 The licensing application must state the products within each activity that the Finance Company intends to offer to its customers.
10.2The board of the Central Bank can review the list of permitted activities specified in Article 10.1 of this Regulation and amend it.
10.3The financing activities of an Islamic Finance Company are those provided under Article 10.1 subject to compliance with Islamic Sharia'a provisions.
10.4A Finance Company may only accept deposits from Juridical Persons and only issue certificates of deposit to Juridical Persons. A Finance Company is strictly prohibited from accepting deposits or loans from individuals and from opening accounts of any kind, excluding loan accounts and in any form on behalf of individuals.
10.5A Finance Company is permitted to borrow from U.A.E. Banks. A Finance Company may receive Foreign funding provided that adequate hedging is in place to mitigate the currency risk. Foreign funding must not exceed 25% of the sum of Aggregate Funding and deposits of a Finance Company.
10.6A Finance Company must have its License updated in order to conduct any activity outside of those specified in the License of the Finance Company.
10.7A Finance Company must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in the License of the Finance Company.
10.8Consistent with Articles 10.1a, 10.1b and 10.1c of this Regulation, the Finance Company may extend advances and loans to Juridical Persons and individuals based in the U.A.E. and offer revolving credit facilities, open letters of credit and issue letters of guarantee to Juridical Persons.
10.9A Finance Company may apply to the Central Bank for non-objection to partner with an Agent to offer Short-Term Credit. Where the Finance Company contracts with an Agent, the Finance Company must, at a minimum, ensure that the Agent complies fully with all applicable Articles of Part II of this Regulation with the exception of Articles (21)Licensing, (22) – License Restrictions and (25) – Minimum Capital Requirements. The Central Bank shall set the requirements for Finance Companies to obtain a non-objection to contract with an Agent on a case by case basis.
10.10The Finance Company’s partnership with an Agent may only involve:
a.The Agent offering the Short-Term Credit products and services of and funded by the Finance Company to Borrowers; and/or
b.The Agent granting Short-Term Credit products to Borrowers, which are fully funded by the Agent.
10.11Consistent with Article 10.1d of this Regulation, the Central Bank shall approve the request of a Finance Company to act as a program manager for the reloadable prepaid cards programs of a U.A.E. Bank with the following conditions:
a.Escrow accounts (pool accounts) should be ring-fenced from deposits of the Finance Company;
b.The U.A.E. Bank remains responsible for anti-money laundering / combating the financing of terrorism compliance and reporting functions;
c.The U.A.E. Bank remains responsible for ensuring that appropriate systems and controls are in place to monitor all transactions;
d.The board of directors of the Finance Company should oversee the business risks;
e.The Finance Company is responsible for ensuring anti-money laundering / know-your-customer procedures, specially initial know-your-customer procedures, are in place and operate effectively;
f.The Finance Company must ensure that its anti-money laundering / knowyour-customer procedures are in line with the anti-money laundering / know-your-customer procedures of the U.A.E. Banks;
g.The Finance Company must screen every transaction against money laundering and terrorism financing for amounts that exceed the threshold as per the law or regulation concerned or any notice issued by the Central Bank;
h.The Finance Company should ensure that procedures are in place on pool account operation, reconciliation controls and independent audit reviews; and
i.The Finance Company must abide by all relevant laws and regulations at all times, in this regard.
10.12In keeping with Article 10.4 of this Regulation, a Finance Company may accept deposits from Juridical Persons and issue certificates of deposit to Juridical Persons, provided that:
a.They are term deposits only, with a minimum tenor of thirty days;
b.Any deposit accepted is subject to a robust asset and liability management; and
c.A single party deposit does not exceed 20% of the total amount of all accepted deposits and certificates of deposits of a Finance Company.
10.13A Finance Company may only participate in the share capital of the following companies. Companies concerned must be incorporated in the U.A.E. or its Free Zones:
a.Brokerage companies;
b.Money exchange companies;
c.U.A.E. Banks; and
d.Finance Companies.
10.14Any single participation mentioned in Article 10.13 of this Regulation must not exceed 10% of the aggregate capital funds as defined in Article 11 of this Regulation and the aggregate participation in the capital base of the companies mentioned in Article 10.13 of this Regulation must not exceed 25% of the Aggregate Capital Funds of the Finance Company.
10.15Any participation in any finance sector company mentioned in Article 10.13 of this Regulation must not exceed 25% of the share capital of the investee. This restriction does not apply to companies supporting operational activities of the investing Finance Company.
10.16A Finance Company may place deposits in U.A.E. Banks and obtain certificates of deposit from U.A.E. Banks provided that:
a.The number of U.A.E. Banks, in which the Finance Company places its deposits is greater than or equal to four; and
b.Any such deposit or certificate of deposit placed in any U.A.E. Bank does not exceed 10% of the Aggregate Capital Funds of the Finance Company.
10.17A Finance Company must obtain approval from the Central Bank in order to issue bonds or sukuks. Bonds and sukuks of a Finance Company must be denominated in United Arab Emirates Dirhams or United States Dollar only.
10.18A Finance Company is prohibited from financing a borrower which is not an entity incorporated in the U.A.E or its free zones, or a U.A.E. resident, or where the mortgaged assets are not in the U.A.E.
10.19A Finance Company is prohibited from conducting any money-exchange business and from entering into any unhedged foreign exchange contracts.
10.20A Finance Company must not purchase or acquire any immovable property, except for immovable property that may be used as premises for its operations.
10.21Article 10.20 of this Regulation shall not prevent a Finance Company from securing a debt on any immovable property and in the event of default in payment of the debt, from entering into a settlement agreement with the relevant borrower and as a result holding that immovable property for realization by sale or auction within three years from the date such ownership was established. The said period could be extended by the Central Bank based on justification acceptable to the Central Bank.
10.22Article 10.20 of this Regulation shall not apply to Islamic Finance Companies, which may own property including immovable property and goods as part of an underlying financing contract with a borrower.
10.23Article 10.20 of this Regulation shall not apply to such property as may from time to time be explicitly approved in advance by the Central Bank.
10.24A Finance Company must not engage in any activity for which it is not licensed under applicable laws and regulations.