UAE Strengthens Financial Sector Oversight with Sweeping New Law

Abu Dhabi, UAE (Oct 2025) – The UAE has introduced a landmark overhaul of its banking and insurance regulatory framework in a bid to enhance financial stability and consumer protection. President H.H. Sheikh Mohamed bin Zayed Al Nahyan issued Federal Decree-Law No. (6) of 2025, a comprehensive law governing the Central Bank of the UAE (CBUAE), licensed banks, financial institutions, and insurance companies. The new legislation, which replaces a 2018 law, significantly expands the Central Bank’s powers and sets stricter mandates on industry practices.

Under the decree-law, licensed banks and insurers are obliged to ensure universal access to financial services for all segments of society, reflecting a drive for greater financial inclusion. In practical terms, this could mean banks need to offer basic accounts or services to underserved populations (e.g., low-income individuals) who might previously have been excluded. The law also centralises consumer protection efforts by establishing unified systems for handling complaints, so customers have a clear channel for grievances across all banks. This move should streamline dispute resolution and make it easier for the Central Bank to monitor and address recurring issues.

Crucially, the law emphasises early intervention in troubled institutions. If a bank or insurance firm shows signs of financial stress or risky practices, the Central Bank can step in with remedial measures before matters worsen. This preemptive approach is akin to regulatory “early warning systems” used in other jurisdictions to prevent bank failures or protect policyholders.

Perhaps the most talked-about aspect of the decree is its toughened penalty regime. The CBUAE can now impose far heftier administrative fines, up to ten times the value of the violation or the illicit gains. This is a dramatic increase from previous limits (the old cap was reportedly AED 200 million, roughly $54 million, which in some cases could be lower than 10x the violation’s value for large transactions). The logic is to ensure penalties are “commensurate with the gravity of violations and the volume of transactions”. In other words, big banks dealing in big money should feel a big sting if they break the rules. To enforce this, the law allows the automatic debiting of fines from a violating institution’s accounts once any court appeals are resolved. Moreover, the Central Bank will publish the names of violators and details of their penalties on its website, a public transparency measure aimed at deterring misconduct (no bank wants to be named-and-shamed for non-compliance).

In the area of credit risk, the new law requires banks to hold adequate guarantees or collateral when extending credit to individuals and single-owner businesses. This addresses concerns about unsecured personal lending and aims to prevent excessive risk-taking in retail and SME loans that could lead to defaults.

CBUAE Governor Khaled Mohamed Balama (in statements made via WAM, the state news agency) lauded the decree as a milestone that reinforces three key objectives: preserving the stability of the UAE Dirham, safeguarding the integrity of the financial system, and ensuring prudent management of the country’s foreign reserves. Analysts note that the timing aligns with the UAE’s post-pandemic economic consolidation and its role as a regional financial safe haven. By tightening oversight now, the Central Bank is preparing for potential global headwinds and making clear that the UAE will uphold international best practices (helpful for its credit rating and investor confidence).

Local banks and insurance firms are now in the process of adjusting to the new regulatory landscape. This includes training staff on the updated consumer protection protocols, enhancing IT systems for reporting to the Central Bank, and reviewing loan approval criteria to meet the collateral requirements. Some institutions may need to bolster their capital buffers or compliance departments to avoid falling foul of the more stringent rules. Overall, the decree-law marks a proactive step by the UAE to future-proof its financial sector, combining inclusivity with accountability. As implementation unfolds, consumers should benefit from stronger protections and a more resilient banking system, while the Central Bank stands ready with greater authority to intervene if any institution veers off course.

Sources: 

Gulf News