The key supervisory objective of the Central Bank of the UAE, consistent with the BCBS Core Principles for Effective Banking Supervision, is to promote the safety and soundness of licensed financial institutions, in particular those in the banking, insurance, payments and remittance sectors.
In doing so, the CBUAE aims to protect the rights of depositors and policyholders, oversee integrity and stability of system participants, and promote transparency and fair dealing by licensed financial institutions in relation to their customers and counterparties.
The CBUAE employs a risk-based approach to supervision. It embodies a structured, forward-looking process designed to identify, assess, measure, monitor and control the key risk factors to which licensed institutions are exposed.
The CBUAE’s Supervision Department is responsible for safeguarding the sector with a focus on three segments: Banking Supervision, Insurance Supervision, and Payment System Supervision. By establishing policies, guidelines, regulations, and other supervisory measures, CBUAE is able to prevent fraud, support stakeholders during economic downturn, and maintain the smooth running of the financial system.
Payment System Supervision
The most up to date guidelines for banks licensed to operate in the UAE, prepared by the CBUAE Regulatory Development Division.
The CBUAE requires all insurance companies operating in the UAE to adopt the Insurance Core Principles (ICP) set out by the International Association of Insurance Supervisors (IAIS).
Payment System Supervision
Payment systems are a vital part of the financial sector. Alongside establishing, developing and operating a number of payment systems, the CBUAE also supervises the service delivery.Payment System Supervision
The CBUAE’s supervision function protects and maintains the strength of the financial industry by assessing risks continuously across licensed financial Institutions. This ensures that licensed firms comply with all regulatory requirements, and ensures their robustness to enhance their sustainability.
Principles of Banking Supervision:
The Basel Committee on Banking Supervision’s Core Principles for Effective Banking Supervision provide the basis for the CBUAE’s banking supervisory processes.
The supervisory principles set out below form the basis for the supervisory activity and actions affecting licensed institutions.
Principle 1: The CBUAE’s emphasis is on risk-focused supervision, prioritising its supervisory activities on the basis of an institution’s risk to the financial system, and in accordance with the CBUAE’s statutory and supervisory objectives..
Principle 2: The CBUAE assesses risks and responds proportionately, according to both the institution’s dynamic risk profile (financial performance, nature of activity, complexity, operating model, governance, structures, risk level, risk controls etc.) and its impact on systemic stability and soundness of the UAE banking and financial sector.
Principle 3: The CBUAE allocates its supervisory resources in accordance with the institutional risk assessment and systemic impact assessment.
Principle 4: The CBUAE applies a system-wide, macro perspective to the micro prudential supervision of banks and banking groups, to assist in identifying, analyzing and taking pre-emptive action to address current or emerging systemic risks that significantly threaten the stability of the banking and financial system.
Principle 5: By calibrating across the sector, the CBUAE ensures that supervisory responses to similar issues are consistent.
Principle 6: The CBUAE endeavours to maintain high standards consistent with international best practice.
Principle 7: The CBUAE considers that ultimate responsibility for organisational risk oversight is borne by the Board and Senior Management of each licensed institution.
Principle 8: By using the Risk Based Supervision (RBS) approach, the CBUAE seeks to reduce the risk and systemic impact of failure, rather than prevent the failure of any institution.
Through an appropriate mix of on-site and off-site supervision, the CBUAE evaluates the condition of licensed institutions, their risk profile, risk management processes, the internal control environment and the corrective measures necessary to address any supervisory concerns.
The Supervision Department has oversight authority over Licensed Institutions in the UAE banking, insurance, and payment system sectors, as well as Exchange Houses and Hawala providers.
The Department endeavours to preserve the safety and soundness of the UAE’s Licensed Financial Sectors by monitoring and intervening on institutional and sectoral risks, maintaining an internationally-benchmarked regulatory framework and ensuring compliance with regulatory requirements.
Last updated on: Friday 26 August 2022
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