UAE President Sheikh Mohamed Bin Zayed Al Nahyan Issues Federal Decree Law On Central Bank And Financial Institutions

The UAE has introduced Federal Decree Law No. (6) of 2025, focusing on the Central Bank and the regulation of financial and insurance activities. This law aims to enhance the stability and competitiveness of the financial sector by aligning it with international standards. It also seeks to strengthen the Central Bank's independence, ensuring monetary stability.

The decree outlines key responsibilities for the Central Bank, including setting monetary policy, supervising licensed financial activities, and issuing regulations for effective financial practices. Additionally, it manages foreign reserves to support sustainable financing and governance principles while monitoring regulatory risks.

To maintain financial stability, the decree mandates early intervention measures for institutions showing signs of financial trouble. These include recovery plans, additional capital requirements, or even management takeovers. If necessary, mergers or liquidations may be pursued to protect customers and ensure stability.

The law also highlights consumer protection by mandating that licensed institutions provide accessible banking services to all community members. This aligns with digital transformation efforts and promotes financial inclusion through national awareness campaigns in partnership with community entities.

Consumer protection is further enhanced by unifying the complaints process under "Sanadak," an independent entity handling disputes for banks and insurance companies. Specialised judicial committees will resolve disputes up to AED100,000, with their decisions being final and enforceable against licensed institutions.

In terms of penalties, the law raises administrative fines based on violation severity and transaction volume. The Central Bank can impose fines up to ten times the violation value, automatically debiting them from accounts held at licensed institutions. Reconciliation is possible before a final judicial decision.

Role of the Central Bank

The Central Bank acts as the "Resolution Authority" during financial crises. It can appoint or remove management, recover funds from responsible individuals, and manage assets through appointed guardians. The bank can also restructure capital or carry out organised liquidations to maintain critical functions.

The decree reaffirms positive practices like aligning credit facilities with customer income to prevent irresponsible lending. It also establishes frameworks for launching awareness campaigns in collaboration with financial sectors and community outreach groups.

This comprehensive approach ensures that UAE's financial ecosystem remains robust and competitive while safeguarding consumer interests through stringent regulatory measures.

With inputs from WAM