A new organization, called the Financial Services Authority, is to be established in the United Arab Emirates in one of the biggest changes made to their financial and banking system in over 30 years. The regulations were brought in as a consequence of the UAE Government wishing to strengthen their regulations to help protect the sector from another international financial crisis. The change is in the regulations is designed to enhance management of the financial market and prevent any future economic downturn from resulting in mismanagement of the financial sector within the UAE.
The UAE Establishment has opted to shift to a duel regulatory model. It will mean you have two authorities for the finance industry – a prudential regulator and a conduct-of-business regulator.
Responsibility for the day to day operation and conduct of business within the financial sector in the UAE will transfer from Central Bank to a strengthened up Securities and Commodities Association. This has been re-labeled as the Financial Services authorities.
This new authority will have management of customer security protection, guarding against unlawful and unethical behaviour and the day to day operation of the financial system within the UAE. As with the SCA, it will be centred in Abu Dhabi and the organisation will take on more personnel to satisfy its new mandate.
The SCA will work in harmony with the UAE’s Central Bank and will stay as the prudential regulator, which will continue to take a strategic view of the economic situation and help to manage the finance sector together with the previous old encumbent. Plans to renovate the 1980 financial act were declared by the UAE’s Central Bank last month, but information of the changes are only now being released. Authorities anticipate a first writing of the new bill by the end of the year with it becoming law hopefully within the next 18 months.
It is a vital aspect of a wider strengthening of the laws surrounding bank lending in the UAE which have been given as one of the principle reasons behind the international financial meltdown of 2007-8. They believe that their proactive stance will stand the country and region in good stead in the future.
Experts believe the UAE have based their duel regulatory approach on the system that is being used in Australia, which has been able to withstand much of the global economic crisis. It is felt that by giving authority to only two organisations rather than a plethora of self interested parties as seen in the USA, this will put them in the best position to act quickly and effectively.
However the UAE has not completely based its system on the Australian style as the Central Bank in the UAE will not be overseeing the regulation of the retail banking sector during the handover period for up to 4 years. Investment Banks, the insurance industry and all other financial organisations in the UAE will however be regulated by this new authority. Authorities say the new Financial Services Authority will not overlap with the Dubai Financial Services Authority, which controls how the financial services industry operates in the Dubai International Financial Centre.
The shift to set up this new system and organisation confirms the UAE’s Government is intent on enhancing the perception of Abu Dhabi as a safe, professional, advanced economy. The Financial Services Association within the UAE sees this as a change for good. For more information on this and anything else going on within the international financial services sector. Please contact us here at MyQROPS.net.