Are new regulations impacting banks in the UAE?

The UAE has long strived to become the next big financial hub, housing the most forward-looking and innovative organisations. Its post-oil economy has been picking up steadily, supported strongly by its evolving regulatory environment and improved corporate governance. The positive outlook of its economy is also highly contributed by the digitalisation of multiple operations within the financial sector.

This brought about a cultural shift, with greater focus towards accountability and transparency within the financial operations in the region.  New regulations are a huge factor in driving this shift that result in increased transparency.  

It is crucial for banks in the UAE to have ample preparation to ensure compliance with international standards and practices within the banking sector. Since 2017, the region has been in the frontline of new regulations in a bid to achieve greater transparency within its financial sector. Below are a few of them:

  • International Financial Reporting Standards 9 (IFRS 9)

The launch of IFRS 9 in late 2017 heralded a new era of accounting, risk management, capital management, regulatory reporting and more for the UAE.

IFRS 9, being a principled based standard, provides banks the ability to apply standardised internal risk management. As with all principle-based guidance, most regulators have mandated banks to set up robust governance structures to mitigate the associated risks including money-laundering, fraud and litigation that is eminent in the region.

  • Value-added Tax (VAT)

VAT was rolled out to improve not only internal controls but ensure a much more accurate collection of data that would help to focus on the growth of its financial economy.

In order to do so, the implementation of VAT begins by cleaning up anomalies in the accounting practice and further improve credibility of the UAE on the global scale. This is in hopes to achieve greater transparency and substantially increase the country's GDP growth, according to industry executives and tax experts.

  • Basel III

Basel III is a set of international banking regulations developed by the Bank for International Settlements in order to promote stability throughout the international financial system. The measures outlined in Basel III are designed to minimise the potential for banks to damage the economy by taking on excess risk.

To prepare for the deadline of compliance by 2019, the UAE Banks Federation (UBF) hosted a six-hour workshop examining the key issues around the upcoming implementation of the Basel III Accord.  The event was held in Abu Dhabi, and the sessions have been arranged by the UBF Risk Management Committee (UBF-RMC) in association with Moody's Analytics, with the aim to help banks prepare for the roll-out of the new regulatory framework. Basel III builds on the Basel II Accord to strengthen the regulation, supervision and risk management of the banking sector, according to a statement from UBF.



Apart from new regulations, how are banks in the UAE being impacted by the cultural shift?

The focus on compliance to new regulations have stimulated a necessity to keep governance and risk in check. Banks would need to be more forward-looking and ensure that they are correctly positioned to not only comply with but also take advantage of the changing regulatory environment if they want to stay successful in the long term.

On a whole, the region has seen a marked improvement and the following were some of the strategies in place that encouraged corporate government practices.

Laws in place for wealth and creditor protection

The new Foundations Law No.3 of 2018 introduces a completely new regime to promote better creditor protection, succession planning and lifetime private wealth planning solutions. It also provides greater certainty and flexibility for private wealth management.

Programmes and forums to educate the public

Banks in UAE have develop a skills matrix to ensure that its employees are aware of the new set of rules initiated across the stat. That includes knowledge and experience in financial reporting and internal controls, strategic planning, risk management, and corporate governance standards. This would also ensure greater accountability amongst key players in the industry.

In addition to the above, forums and conferences have been held in the region to explore areas of finance and risk management. Through keynote sessions and panel discussions, the upcoming Global Financial Forum 2019 will explore topics such as:

  • Opportunities and challenges in the economies of the MENA region

  • The future of Islamic finance

  • The rewards of financial inclusion, fintech and innovation in financial services

  • Growing markets of Dubai, India and China

There are also other programmes in place which would include insights and analysis from a highly selective group of invited experts and leaders across multiple sectors, including economics, financial regulation and technology.

Is there sustainable growth for the financial sector in the UAE?

Persistence to keep up with these initiatives would be essential to ensure that sustainable financial goals are achieved. Pursing their fintech dreams, Regulatory Technologies (RegTech) will also be a key trend that is up and coming. However, this is also dependent on the outlook for talent that is available in the market to support these trends.

If you like to find out more information about the market outlook within the sector, you may get in touch with me or drop us an email at [email protected] You may also visit our website or connect with us on LinkedIn to get updates on banking and financial trends across Asia Pacific and Middle East.

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