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The Central Bank of the UAE (CBUAE) has issued a new regulation covering licensing, prudential, and conduct requirements for specialized banks.
Specialized banks are licensed under the CBUAE’s new regulation and are allowed to practice different financial activities to serve the local community, such as account opening, card issuance, and retail and wholesale lending. Specialized banks are permitted to provide their services to UAE nationals and UAE residents only.
The objective of the new regulation is to provide a regulatory framework in which specialized banks can operate in the UAE financial sector in a robust and prudent manner.
Specialized banks are allowed to conduct their activities in the UAE Dirhams only and operate according to a low credit risk model. They can be established either as a conventional specialized bank without Islamic windows or as an Islamic specialised bank.
The regulation sets a minimum paid-up capital requirement of AED 300 million that specialized banks must maintain and a risk-based capital adequacy requirement that they should continuously adhere to. It also sets the total consolidated assets of specialized banks which shouldn’t exceed AED 25 billion.
The CBUAE stresses the importance of specialized banks’ compliance with all regulations, standards, and notices issued for the banking sector, except where there are specific provisions contained in the new regulation which apply to specialized banks only.
The new regulation has been published in the Official Gazette on 31 March 2021 and came into effect on 30 April 2021.
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