The sector has made tremendous progress during the past decade with the set-up of the Dubai International Financial Centre as the first onshore financial free zone in the country, as well as other measures taken by the UAE Central Bank to ensure transparency and healthy competition among the banks it manages.
This year should be no exception, with economic growth in the country predicted to have a positive impact on the banking sector.
With such growth, however, comes greater responsibility, first to ensure that the financial services profession continues to contribute to the economy in a sustainable manner and, second, to make sure the correct regulations are in place to support this growth.
Before looking at how regulations need to be implemented and assessing what their impact will be on ethical and professional behaviour, it is important to see how far the UAE financial sector has come in terms of its regulatory landscape.
Financial services regulation in the UAE
The primary regulations of the UAE’s banking industry date back to 1980 when the UAE Federal Law No 10 was implemented to establish the UAE Central Bank.
This was followed by the promulgation of the monetary system and the Organisation of Banking, commonly known as the Banking Law, which provides a comprehensive set of provisions pertaining to the registration, licensing and operation of commercial and investment banks, and other financial institutions and intermediaries.
More recent changes include the introduction of VAT in the UAE, an increased focus on corporate governance and updates in 2016/17 to the Basel Accords, a series of three banking regulations (Basel I, II and III) set by 27 countries and the EU, collectively known as the Basel Committee on Bank Supervision.
Additionally, with the advent of e-commerce and e-banking, the sector has begun to embrace major tech disruptions such as artificial intelligence, blockchain and fintech. ‘Traditional’ banks have been pushed out of their comfort zones and forced to adapt to the changing technological landscape.
How regulations have been implemented
These are just a few of the changes that have had a huge impact on financial services. UAE regulatory bodies, the Dubai Financial Services Authority, Securities and Commodities Authority (SCA) and Abu Dhabi Global Markets Financial Services Regulatory Authority, have responded with stringent regulatory requirements and guidelines.
These are issued and monitored closely, necessitating education and follow-through by financial services professionals.
One example is the Regulatory Framework for Stored Values and Electronic Payment Systems Regulation (EPS) issued by the UAE Central Bank pursuant to the Cabinet Decision No 6/6 of 2016.
The Dubai Financial Market set up a trading platform to provide continuous support to the thriving ETF sector. These breakthroughs have acknowledged the fast-growing business of digitalisation in the country, which is a giant step to technological adoption.
Another notable policy implemented by the SCA is that 30 hours of continuing professional development (CPD) per year is now mandatory for each financial professional within licensed firms.
The SCA has also increased the number of job roles within licensed firms that must be held by qualified individuals, making it the only regulator to mandate both qualifications and CPD to UAE financial professionals.
Impact on ethical and professional behaviour
Taking all this into consideration, it is crucial that financial services professionals based in the country have best-in-class qualifications to ensure regulations are adhered to as intended.
Professional bodies such as the Chartered Institute for Securities & Investment aim to maintain and develop the skillset of professionals working within banking and other financial services to promote trust and integrity within the sector.
Keeping in mind the UAE’s goal to establish a diversified, knowledge-based economy as part of the Economic Vision 2030, a solid regulatory framework will keep the ball rolling in the establishment of a resilient monetary and financial market environment.
The UAE is undoubtedly going in the right direction to establishing and maintaining a robust regulatory framework, which is cultivating a culture of transparency, integrity and high standards of professionalism, on a par with bigger and more established economies around the world.
UAE among true believers in ethical investing
By Matthew Cowan, regional director, Chartered Institute for Securities & Investment