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:
i. Ensuring the soundness of Banks, and
ii. 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.
[1] The 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.
Circular No.: 83/2019
Date: 18/7/2019
To: All Banks
Subject: Corporate Governance Regulation for Banks
Access the circular at: https://centralbank.ae/en/laws-and-regulations/regulations/banking
