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  • (Restricted) Finance Companies

    • Finance Companies Regulation

      C 3/2023 Effective from 29/9/2023

      The Board of Directors of the Central Bank,

      Having perused Decretal Federal Law No. (14) of 2018 Regardng the Central Bank & Organisation of Financial Institutions and Activities and its amendments;

      Decree Federal Law No. (20) of 2018 regarding Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations and its amendments;

      Federal Law No. (6) of 2010 regarding the Credit Information and its amendments;

      Federal Decree Law No. (32) of 2021 concerning Commercial Companies; and

      Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Federal Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations and its amendments.

      Has decided the following:

      • Article (1) Introduction

        1.1The Central Bank is seeking to enhance the organization, development and regulation of Finance Companies and Restricted Licence Finance Companies in the United Arab Emirates (U.A.E.) in the context of the overall organization of the financial sector.
         
        1.2In introducing this Regulation the Central Bank wishes to ensure that Finance Companies and Restricted Licence Finance Companies in the U.A.E. are:
         
        a.Operating within transparent and well-defined organizational structures and operations;
         
        b.Prudently managed within a framework of permissible activities; and
         
        c.Equipped with the necessary financial resources and internal risk management systems.
         
        1.3This Regulation also establishes a framework for the regulation and supervision of Restricted Licence Finance Companies and sets requirements for Finance Companies to contract with Agents, both of which are permitted to offer only Short-Term Credit faciltiies. Restricted Licence Finance Companies are not permitted to contract with Agents to offer Short-Term Credit. Agents, therefore, must partner with either a Finance Company or a Bank before offering Short- Term Credit. The following are outside of the scope of this Regulation:
         
        a.Short-Term Credit activities conducted directly between Juridical Persons and not conducted by way of business;
         
        b.Any credit activity, whereby the payment to the vendor directly by the purchaser of a good or service is completed on an instalment basis and not conducted by way of business; and
         
        c.Factoring and/or Finance Lease activities.
         

      • Article (2) Objective

        2.1The objective of this Regulation is to provide a regulatory framework in which Finance Companies and Restricted Licence Finance Companies can operate and develop within the overall U.A.E. financial sector in a robust and prudent manner. The framework set out in this Regulation is aimed at:
         
        a.Protecting the customers of Finance Companies and Restricted Licence Finance Companies;
         
        b.Protecting Finance Companies and Restricted Licence Finance Companies; and
         
        c.Enhancing the overall stability of the financial sector.
         
        2.2This Regulation is issued by the Central Bank pursuant to the powers vested in the Central Bank Law.
         
        2.3Where this Regulation includes a requirement to provide information or to take certain measures, or to address certain items listed at a minimum, the Central Bank may impose requirements, which are additional to the list provided in the relevant article.
         

      • Article (3) Application

        3.1This Regulation applies to Finance Companies and Restricted Licence Finance Companies except where specifically mentioned otherwise in this Regulation. All branches of any Finance Company or Restricted Licence Finance Company operating in the U.A.E. shall be regarded together as one Licensee.
         
        3.2Part I of this Regulation applies fully to Finance Companies with the exception of Restricted Licence Finance Companies.
         
        3.3Part II of this Regulation applies fully to Restricted Licence Finance Companies. Finance Companies and Banks must ensure that their Agents comply with the Articles in Part II of the Regulation which are applicable to Agents, as indicated. Agents are not required to comply with Articles (21) – Licensing, (22) – License Restrictions, and (25) – Minimum Capital Requirements.
         
        3.4Part III of this Regulation applies fully to Finance Companies and Restricted Licence Finance Companies.
         

      • Article (4) Definitions

        The following terms and phrases shall have the definitions assigned to them for the purpose of this Regulation:
         
        a.Affiliate: an entity that, directly or indirectly, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity;
         
        b.Agent: a Juridical Person who is contracted to offer, grant, market, sell, intermediate and/or process a Short-Term Credit with a Borrower on behalf of a Finance Company or a Bank;
         
        c.Aggregate Funding: the total amount of debt capital that a Finance Company borrows from external sources, including its Parent Company. This includes, but is not limited to,
         
        d.Aggregate Liabilities: the total amount of onbalance sheet and off-balance sheet liabilities of a Finance Company;
         
        e.AML Law: means Decree Federal Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations and Cabinet Decision No. (10) of 2019 Concerning the Implementing Regulation of Decree Federal Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations, as amended, and any instructions, guidelines and notices issued relating to their implementation;
         
        f.Authorized Individual: any natural person authorized in accordance with the provisions of the Central Bank Law, to carry on any of the Designated Functions;
         
        g.Bank: any juridical person licensed in accordance with the provisions of the Central Bank Law, to primarily carry on the activity of taking deposits, and any other licensed financial activities;
         
        h.Borrower: a UAE resident Person who is granted a Short-Term Credit;
         
        i.Central Bank: the Central Bank of the United Arab Emirates;
         
        j.Central Bank Law: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organisation of Financial Institutions and Activities, as amended;
         
        k.Commercial Companies Law: Federal Decree Law No. 32 of 2021 on Commercial Companies, as amended;
         
        l.Confidential Data: account or other information relating to a Finance Company customer or employee, who is or can be identified, either from the confidential data or from the confidential data in conjunction with other information that is in, or is likely to come into, the possession of a person, organization, or process that is granted access to the confidential data;
         
        m.Controlling Influence: the relationship between a Parent Company and a Subsidiary, where the Parent Company holds a minimum of 50% of the Subsidiary’s share capital or has control over it via, for example, the composition of the board of directors, or via a similar relationship between any natural or Juridical Person or company;
         
        n.Credit Exposure: the value of a funded and unfunded exposure and unused committed lines that are subject to any credit risks, such as default or credit rating downgrade;
         
        o.Credit Information Agency: Al Etihad Credit Bureau and any credit information agency established for the purpose of credit reporting requirements in the UAE;
         
        p.Credit Report: is a collection of historical credit data from various financial institutions, utility companies, government, etc., on individuals and companies in the UAE;
         
        q.Crowdfunding: is solicitation of funds from persons through a platform for a specific purpose;
         
        r.Designated Functions: functions of the Authorized Individual at, or for the benefit of, a Licensee of influential nature on the institution’s activities;
         
        s.Duty of Care: the duty of a member of the board of directors to act on an informed and prudent basis in decisions with respect to the Finance Company;
         
        t.Duty of Loyalty: the duty of a member of the board of directors to act in the interest of the Finance Company;
         
        u.Factoring: (as defined in Federal Decree-Law No. 16/2021 on Factoring and Transfer of Civil Accounts Receivable) a transaction whereby the assignor transfers the current or future debtor ’ s accounts receivable, or both, to an assignee, or agrees that the assignee maintains and collects entries related to the transferred accounts receivable and provides protection to the assignee in case the debtor breaches the payment;
         
        v.Fee: Any fees, charges, penalties and commissions incurred on a product and/or service by a Borrower;
         
        w.Finance Lease: (as defined in Federal Law No. 8/2018 on Finance Lease) a relationship whereby the lessor owns the leased property for rental purposes and leases it to the lessee for a specified period under a separate contract in accordance with the provisions of the Federal Law, while granting the latter the right of choosing to own the leased property in accordance with the provisions hereof;
         
        x.Financing: permitted activities as referred to in Article 10 of this Regulation;
         
        y.Finance Company: a conventional finance company and/or an Islamic Finance Company;
         
        z.Fitness and Probity or Fit and Proper: professional requirements and personal integrity requirements addressed to the board of directors and Senior Management in this Regulation;
         
        aa.Foreign Funding: any borrowing or acceptance of deposits from any corporate entity incorporated outside of the U.A.E. and its free zones;
         
        ab.Free Zone: all free zones in the UAE except the financial free zones;
         
        ac.Higher Sharia’a Authority: the Authority established by the Central Bank to ensure implementation of Islamic Sharia’a provisions at financial institutions carrying on their entire activities or part thereof in accordance with Islamic Sharia’a provisions;
         
        ad.Independent Member of the Board: a member of the board of directors who does not have any management responsibilities within the Finance Company and is not under any undue influence, internal or external, or ownership, that would impede the board member’s exercise of objective judgment, including but not limited to a relationship with the Finance Company, any of its Senior Management, external auditor, significant shareholders, subsidiaries or affiliates that could lead to financial or other benefit, in addition to other conditions that the Central Bank may specify from time to time;
         
        ae.Islamic Finance Company: a Central Bank licensed company engaged in Financing activities whose memorandum and articles of association include a commitment to apply Sharia'a provisions and to conduct its activities as per those provisions;
         
        af.Juridical Person: a Juridical Person in accordance with Article 92 of Federal Law No. 5 of 1985 Concerning the Issuance of the Civil Transactions Law. For the purpose of this Regulation, this definition only refers to Juridical Persons in the U.A.E.;
         
        ag.License: authorization issued by the Central Bank to conduct the business of Finance Companies or Restricted Licence Finance Companies;
         
        ah.Licensee: a Juridical Person licensed by the Central Bank to conduct Financing activities per the provisions of this Regulation;
         
        ai.Material Business Activity: an activity of the Finance Company that has the potential, if disrupted, to have a significant impact on the Finance Company’s business operations or its ability to manage risks effectively;
         
        aj.Outsourcing: an agreement with another party either within or outside the UAE, including a party related to the Licensee, to perform on a continuing basis an activity which currently is, or could be, undertaken by the Licensee itself;
         
        ak.Parent Company: an entity (the 'first entity') which:
         
        1.holds a majority of the voting rights in another entity (the 'second entity');
         
        2.is a shareholder of the second entity and has the right to appoint or remove a majority of the board of directors or managers of the second entity; or
         
        3.is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity.
         
         or;
         
        4.if the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity.
         
        al.Principal Shareholder: any shareholder of a Finance Company who owns, directly or indirectly, 5% or more of shareholdings of a Finance Company;
         
        am.Regulations: any resolution, regulation, circular, rule, standard or notice issued by the Central Bank;
         
        an.Related Entities: any of the following:
         
        1.Two or more natural or Juridical Persons who, unless shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others, or can exercise a Controlling Influence over the other party in making financial and operating decisions; or
         
        2.Two or more natural or Juridical Persons between whom there is no relationship of control but who are to be regarded as constituting a single risk because they are so inter-related that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties;
         
        ao.Restricted Licence Finance Company: a Juridical Person licensed by the Central Bank to conduct the licensed financial activity of granting Short-Term Credit only;
         
        ap.Senior Management: the executive management of the Finance Company or Restricted Licence Finance Company responsible and accountable to the board of directors for the sound and prudent day-to-day management of the Finance Company or Restricted Licence Finance Company, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer and heads of the compliance and internal audit functions;
         
        aq.Short-Term Credit: any credit which is granted to a Borrower for a period of not more than twelve (12) months, for the express purposes of purchasing specified, identifiable goods or services, without interest being charged nor a lien being placed against collateral nor a security deposit being required from the Borrower;
         
        ar.Subsidiary: an entity (the 'first entity') is a subsidiary of a Finance Company (the 'second entity') if the second entity:
         
        1.holds a majority of the voting rights in the first entity;
         
        2.is a shareholder of the first entity and has the right to appoint or remove a majority of the board of directors or managers of the first entity; or
         
        3.is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity.
         
         or;
         
        4.if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity;
         
        as.U.A.E. Banks: all banks licensed by the Central Bank.
         

      • Article (5) Superseded Requirements and General Provisions

        5.1This Regulation replaces all previous Central Bank regulations with respect to Finance Companies including the following:
         
        RegulationsProvisions
        Central Bank Board of Directors' Resolution No. 58/3/96 regarding the regulation for finance companies and its amendmentsAll articles
        Central Bank Board of Directors' Resolution No. 165/6/2004 regarding the regulation for finance companies which conduct their business per Islamic Sharia'a PrinciplesAll articles

      • PART I - Finance Companies (does not apply to Restricted Licence Finance Companies)

        • Article (6) Applying for a License

          6.1The conducting of Financing activities in the U.A.E. is prohibited unless licensed by the Central Bank to do so.
           
          6.2Conducting Financing activities is restricted to Juridical Persons. The application must specify the range of activities for which the License is requested and must include the following:
           
          6.2.1A statement identifying the nature and scope of the types of activities, mentioned in Article 10 of this Regulation, that a new Finance Company proposes to undertake. In addition, the statement must specify any plans the applicant may have with regard to the future developments of these kinds of business, as well as details regarding the applicant's arrangements related to managing its business.
           
          6.2.2A feasibility study identifying the target market, the services to be provided, the business model and the strategy of the Finance Company, in addition to a three-year feasibility study that includes at least the following:
           
          a.Financing activities and products to be launched;
           
          b.Estimated financial statements, projected annual revenue and expenses, financial margins and targeted growth rates, taking into account Central Bank requirements according to Article 11 and Article 12 of this Regulation;
           
          c.Projected start-up costs and financing thereof;
           
          d.Projected ongoing financing of operations;
           
          e.The risk factors;
           
          f.A summary of the corporate structure, legal form and corporate governance standards adopted by the Finance Company;
           
          g.Branches to be established by the Finance Company; and
           
          h.A recruitment plan with the projected number of employees, including those of U.A.E. nationality. The Central Bank may set specific requirements for the share of employees of the Finance Company who are U.A.E. nationals.
           
          6.2.3The names, addresses, nationalities and share holdings of the shareholders, in addition to a certified copy of the memorandum and articles of association after the completion of the establishment procedures, as per the provisions of the Commercial Companies Law. For the shareholders who are U.A.E. nationals, U.A.E. identity cards are required in addition to a list of family members and their relationship to the founding members. For expatriate shareholders, passport and valid residency visa copies and U.A.E. identity cards are required. If the founding members are Juridical Persons, then constitutional documents duly legalized are required.
           
          6.2.4Organizational structure showing the main departments, sections, lines of reporting, authorities and responsibilities. This structure should be appropriate, balanced, and acceptable to the Central Bank.
           
          6.2.5Curriculum vitae of persons recommended for board of directors and Senior Management positions. The Central Bank may decide to interview nominees.
           
          6.2.6A certificate issued by a U.A.E. Bank indicating that the license applicant holds at least 25 million United Arab Emirates Dirhams of its paid up capital in deposits; in addition, an undertaking to deposit the remaining balance of the minimum required paid-up capital immediately after obtaining a preliminary approval from the Central Bank.
           
          6.2.7A letter of unconditional guarantee by one of the U.A.E. Banks, issued to the Central Bank, for an amount equivalent to the minimum required paid-up capital. This letter of guarantee must be renewable automatically until the required minimum paid-up capital is paid in full. The letter of guarantee shall be released upon the request of the founding shareholders in the following cases:
           
          a.Payment of the required minimum amount of paid-up capital in cash;
           
          b.Withdrawal of the License application; or
           
          c.Rejection of the License application by the Central Bank.
           
          6.2.8An undertaking to abide by the provisions of the Central Bank Law and the Commercial Companies Law as well as the provisions of this Regulation and any decisions, instructions, directives, circulars or correspondence issued by the Central Bank with regard to Financing activities.
           
          6.2.9An undertaking to make available records and documents to be supervised, examined and reviewed by the Central Bank, as well as an undertaking to comply with the AML Law.
           
          6.2.10Any other information and/or documents requested by the Central Bank for the purpose of deciding on the application for a License.
           
          6.3The applicants might apply for either a conventional Finance Company License or an Islamic Finance Company License. As such, Islamic windows in conventional Finance Companies are prohibited.
           
          6.4The legal form of a Finance Company must be in one of the forms stipulated in the Commercial Companies Law. It shall be subject to Central Bank licensing, supervision and examination, as per the provisions of the Central Bank Law.
           

        • Article (7) Scope of License

          7.1The Licensee must commence licensed activities, specified in its License according to Article 10 of this Regulation, within a maximum of 12 months from the date of notification of approval of License.
           
          7.2The License shall be granted for an initial period of three years and shall be renewable for same periods unless otherwise required by the Central Bank. A Finance Company must apply to the Central Bank for License renewal no later than two months before the expiry date of the existing License.
           
          7.3The License shall contain the terms deemed appropriate by the Central Bank.
           
          7.4The Central Bank may take any action deemed appropriate to ensure the sound functioning of the Finance Companies.
           

        • Article (8) Notification of Approval or Refusal

          8.1The Central Bank may approve or refuse the License application after reviewing the application and obtaining all requested information.
           
          8.2The Central Bank shall notify the applicant of its decision in writing, with reasons provided in the event a License application is refused, within fifteen days after the date of the decision of the Central Bank’s board of directors.
           

        • Article (9) License Amendment, Cancellation or Restriction

          9.1The Central Bank may, at any time, through a decision by its board, cancel, change, restrict, impose or withdraw any condition imposed on a License. The Finance Company shall have the right to comment with regard to the reasons for such cancellation, alteration, restriction, imposition or withdrawal. The Central Bank shall not be obliged to but may consider such comments at its sole discretion.
           
          9.2The Central Bank may, through a decision by its board, revoke or withdraw a License of a Finance Company in the following cases:
           
          a.If the Finance Company violates any provision of this Regulation, or the provisions of the Central Bank Law, or any other applicable laws, regulations, decisions, instructions, directives, circulars or correspondence issued by the Central Bank, including regulations regarding anti-money laundering / combating the financing of terrorism requirements; or if the License requirements are not met or cannot be met;
           
          b.If the Central Bank is provided with false, misleading or inaccurate information by the Finance Company or by those acting on its behalf, including its managers, supervisors or auditors;
           
          c.If the interests of the current or potential customers of the Finance Company are at risk, whether due to the manner in which the Finance Company conducts its business or intends to conduct its business, or for any other significant reason;
           
          d.If an order to liquidate the business of the Finance Company or of its Parent Company is issued by any competent judicial authority;
           
          e.If a court receiver, or any other similar officer is appointed to oversee the business of the Finance Company;
           
          f.If a bankruptcy order against the Finance Company is issued;
           
          g.If the Finance Company has not commenced operations within twelve months from the date of notification of approval of the License;
           
          h.If the Finance Company ceases to operate for a period of twelve consecutive months;
           
          i.If the Central Bank determines that the Finance Company is unable to repay debts that are due, or that asset values are less than its liabilities, after taking into consideration current and future claims;
           
          j.If the concerned local authorities have withdrawn any licenses granted by them to the Finance Company;
           
          k.If the Finance Company conducts any business activity from premises other than those approved by the Central Bank;
           
          l.If the Senior Management of the Finance Company is not deemed Fit and Proper; and
           
          m.In any additional case determined by the Central Bank at its sole discretion.
           
          9.3A Finance Company wishing to cease or suspend any of its licensed activities must apply to the Central Bank at least six months in advance providing the reasons for such a cessation or suspension.
           
          9.4Any Finance Company that fails to comply with the AML Law and regulations and any other resolutions or instructions issued by the Central Bank in this regard, will be penalized in accordance with the prevailing laws and regulations.
           
          9.5In case a Finance Company is not compliant with any of the provisions of this Regulation, the Central Bank shall have the sole authority to consider imposing fines, penalties or any such action on the Finance Company at the sole discretion of the Central Bank.
           

        • Article (10) Permitted activities

          10.1A company can apply for a License to conduct one or more of the following types of activities:
           
          a.Retail finance, including personal loans, credit cards, vehicle loans and Short-Term Credit;
           
          b.Mortgage finance, including residential mortgages and commercial mortgages;
           
          c.Wholesale finance, including loans to large corporate borrowers, small and medium-sized enterprises, microfinancing, finance and operating leasing and wage protection schemes;
           
          d.Pre-paid cards; and
           
          e.Distribution of third party products as an agent; provided that the Finance Company received approval from the relevant competent authority for the distribution of the third party products concerned.
           
           The licensing application must state the products within each activity that the Finance Company intends to offer to its customers.
           
          10.2The board of the Central Bank can review the list of permitted activities specified in Article 10.1 of this Regulation and amend it.
           
          10.3The financing activities of an Islamic Finance Company are those provided under Article 10.1 subject to compliance with Islamic Sharia'a provisions.
           
          10.4A Finance Company may only accept deposits from Juridical Persons and only issue certificates of deposit to Juridical Persons. A Finance Company is strictly prohibited from accepting deposits or loans from individuals and from opening accounts of any kind, excluding loan accounts and in any form on behalf of individuals.
           
          10.5A Finance Company is permitted to borrow from U.A.E. Banks. A Finance Company may receive Foreign funding provided that adequate hedging is in place to mitigate the currency risk. Foreign funding must not exceed 25% of the sum of Aggregate Funding and deposits of a Finance Company.
           
          10.6A Finance Company must have its License updated in order to conduct any activity outside of those specified in the License of the Finance Company.
           
          10.7A Finance Company must obtain a no objection letter from the Central Bank in order to provide any new product line from within activities specified in the License of the Finance Company.
           
          10.8Consistent with Articles 10.1a, 10.1b and 10.1c of this Regulation, the Finance Company may extend advances and loans to Juridical Persons and individuals based in the U.A.E. and offer revolving credit facilities, open letters of credit and issue letters of guarantee to Juridical Persons.
           
          10.9A Finance Company may apply to the Central Bank for non-objection to partner with an Agent to offer Short-Term Credit. Where the Finance Company contracts with an Agent, the Finance Company must, at a minimum, ensure that the Agent complies fully with all applicable Articles of Part II of this Regulation with the exception of Articles (21) – Licensing, (22) – License Restrictions and (25) – Minimum Capital Requirements. The Central Bank shall set the requirements for Finance Companies to obtain a non-objection to contract with an Agent on a case by case basis.
           
          10.10The Finance Company’s partnership with an Agent may only involve:
           
           
          a.The Agent offering the Short-Term Credit products and services of and funded by the Finance Company to Borrowers; and/or
           
          b.The Agent granting Short-Term Credit products to Borrowers, which are fully funded by the Agent.
           
          10.11Consistent with Article 10.1d of this Regulation, the Central Bank shall approve the request of a Finance Company to act as a program manager for the reloadable prepaid cards programs of a U.A.E. Bank with the following conditions:
           
          a.Escrow accounts (pool accounts) should be ring-fenced from deposits of the Finance Company;
           
          b.The U.A.E. Bank remains responsible for anti-money laundering / combating the financing of terrorism compliance and reporting functions;
           
          c.The U.A.E. Bank remains responsible for ensuring that appropriate systems and controls are in place to monitor all transactions;
           
          d.The board of directors of the Finance Company should oversee the business risks;
           
          e.The Finance Company is responsible for ensuring anti-money laundering / know-your-customer procedures, specially initial know-your-customer procedures, are in place and operate effectively;
           
          f.The Finance Company must ensure that its anti-money laundering / knowyour-customer procedures are in line with the anti-money laundering / know-your-customer procedures of the U.A.E. Banks;
           
          g.The Finance Company must screen every transaction against money laundering and terrorism financing for amounts that exceed the threshold as per the law or regulation concerned or any notice issued by the Central Bank;
           
          h.The Finance Company should ensure that procedures are in place on pool account operation, reconciliation controls and independent audit reviews; and
           
          i.The Finance Company must abide by all relevant laws and regulations at all times, in this regard.
           
          10.12In keeping with Article 10.4 of this Regulation, a Finance Company may accept deposits from Juridical Persons and issue certificates of deposit to Juridical Persons, provided that:
           
          a.They are term deposits only, with a minimum tenor of thirty days;
           
          b.Any deposit accepted is subject to a robust asset and liability management; and
           
          c.A single party deposit does not exceed 20% of the total amount of all accepted deposits and certificates of deposits of a Finance Company.
           
          10.13A Finance Company may only participate in the share capital of the following companies. Companies concerned must be incorporated in the U.A.E. or its Free Zones:
           
          a.Brokerage companies;
           
          b.Money exchange companies;
           
          c.U.A.E. Banks; and
           
          d.Finance Companies.
           
          10.14Any single participation mentioned in Article 10.13 of this Regulation must not exceed 10% of the aggregate capital funds as defined in Article 11 of this Regulation and the aggregate participation in the capital base of the companies mentioned in Article 10.13 of this Regulation must not exceed 25% of the Aggregate Capital Funds of the Finance Company.
           
          10.15Any participation in any finance sector company mentioned in Article 10.13 of this Regulation must not exceed 25% of the share capital of the investee. This restriction does not apply to companies supporting operational activities of the investing Finance Company.
           
          10.16A Finance Company may place deposits in U.A.E. Banks and obtain certificates of deposit from U.A.E. Banks provided that:
           
          a.The number of U.A.E. Banks, in which the Finance Company places its deposits is greater than or equal to four; and
           
          b.Any such deposit or certificate of deposit placed in any U.A.E. Bank does not exceed 10% of the Aggregate Capital Funds of the Finance Company.
           
          10.17A Finance Company must obtain approval from the Central Bank in order to issue bonds or sukuks. Bonds and sukuks of a Finance Company must be denominated in United Arab Emirates Dirhams or United States Dollar only.
           
          10.18A Finance Company is prohibited from financing a borrower which is not an entity incorporated in the U.A.E or its free zones, or a U.A.E. resident, or where the mortgaged assets are not in the U.A.E.
           
          10.19A Finance Company is prohibited from conducting any money-exchange business and from entering into any unhedged foreign exchange contracts.
           
          10.20A Finance Company must not purchase or acquire any immovable property, except for immovable property that may be used as premises for its operations.
           
          10.21Article 10.20 of this Regulation shall not prevent a Finance Company from securing a debt on any immovable property and in the event of default in payment of the debt, from entering into a settlement agreement with the relevant borrower and as a result holding that immovable property for realization by sale or auction within three years from the date such ownership was established. The said period could be extended by the Central Bank based on justification acceptable to the Central Bank.
           
          10.22Article 10.20 of this Regulation shall not apply to Islamic Finance Companies, which may own property including immovable property and goods as part of an underlying financing contract with a borrower.
           
          10.23Article 10.20 of this Regulation shall not apply to such property as may from time to time be explicitly approved in advance by the Central Bank.
           
          10.24A Finance Company must not engage in any activity for which it is not licensed under applicable laws and regulations.
           

        • Article (11) Minimum Capital Requirements

          11.1Aggregate capital funds consist of the following items:
           
          a.Paid-up capital;
           
          b.Reserves, excluding revaluation reserve; and
           
          c.Retained earnings.
           
          11.2The following items must be deducted from aggregate capital funds:
           
          a.Accumulated losses; and
           
          b.Goodwill.
           
          11.3The minimum required paid-up capital for a Finance Company is 150 million United Arab Emirates Dirham.
           
          11.4In the event that Aggregate Capital Funds of a Finance Company fall below 150 million United Arab Emirates Dirham, the Finance Company must present a plan to rectify the shortfall to the Central Bank within 30 days of the occurrence of the shortfall. The plan must be approved by the board of directors of the Central Bank.
           
          11.5U.A.E. national ownership of a Finance Company must comprise at least 60% of total paid-up capital.
           
          11.6The amount of Aggregate Liabilities of a Finance Company must be limited to 100% of its Aggregate Capital Funds during the first two years of operation. Thereafter, approval may be sought from the Central Bank to allow the value of Aggregate Liabilities to increase to 200% of the Aggregate Capital Funds; up to 300% after four years; up to 500% after seven years; and up to 700% after ten years. A Finance Company may, for the purpose of this calculation, deduct from Aggregate Liabilities any of the following items:
           
          a.Cash collaterals;
           
          b.Bank guarantees from U.A.E. Banks; and
           
          c.Sovereign guarantees.
           
           The items listed under the letters a, b and c of this Article must be legally enforceable.
           
          11.7A Finance Company should allocate at least 10% of its annual net profits to the establishment of a statutory reserve until such point as that statutory reserve equals 50% of its paid-up capital.
           
          11.8Shareholders of a Finance Company must not withdraw an amount exceeding their share of the annual net profit identified in the provisions of the Commercial Companies Law.
           
          11.9A Finance Company must obtain approval from the Central Bank for any proposed dividend distribution and they must do so before announcing the proposed dividend publicly in a press announcement or by other means of communication and prior to submitting a proposal for a distribution of profits for shareholder approval.
           

        • Article (12) Liquidity Requirements

          12.1The following items may be considered as liquid assets:
           
          a.Cash held in a U.A.E. Bank;
           
          b.Certificates of deposit issued by the Central Bank held via a U.A.E. Bank;
           
          c.Short-term deposits with a U.A.E. Bank with maturity up to 30 days; and
           
          d.UAE Federal and local government bonds, which must not exceed 30% of the total amount of liquid assets.
           
           Encumbered cash held as collateral by a Finance Company is not considered as liquid assets.
           
          12.2To withstand short-term liquidity stress, Finance Companies are required to hold an amount equivalent to 10% of their Aggregate Liabilities in liquid assets. A Finance Company may, for the purpose of this calculation, deduct from Aggregate Liabilities any of the following items:
           
          a.Cash collaterals;
           
          b.Bank guarantees from U.A.E. Banks; and
           
          c.Sovereign guarantees.
           
           The items listed under the letters a, b and c of this Article must be legally enforceable.
           
          12.3Consistent with Article 12.2 of this Regulation a Finance Company must not hold more than 25% of its liquid assets in a single U.A.E. Bank.
           
          12.4Customer deposits of a Finance Company are not subject to cash reserve requirements.
           

        • Article (13) Credit Exposure Restrictions

          13.1A Finance Company’s Credit Exposure to a single borrower or group of Related Entities is considered as a Large Credit Exposure, where its value is equal to or exceeds 7% of the Finance Company’s Aggregate Capital Funds. For the purpose of calculating the value of a Large Credit Exposure, a Finance Company may consider whether to deduct any of the following items:
           
          a.Provisions;
           
          b.Cash collaterals;
           
          c.Bank guarantees from U.A.E. Banks; and
           
          d.Sovereign guarantees.
           
           The items listed under the letters b, c and d of this Article must be legally enforceable.
           
          13.2The aggregate amount of Large Credit Exposures must not exceed 100% of the Aggregate Capital Funds of a Finance Company.
           
          13.3In addition to Article 13.2, the Central Bank has defined maximum permissible Credit Exposure limits, as shown in Table 1 below.
           

          Table 1: Maximum Credit Exposure Limits

          BorrowerAggregate percentage of Aggregate Capital FundsIndividual percentage of Aggregate Capital Funds
          A single borrowerNot applicable10%
          A group of Related EntitiesNot applicable15%
          Principal Shareholders and their Related Entities20%10%
          Subsidiaries and Affiliates of a Finance Company20%10%
          Board membersNot allowedNot allowed
          Employees of the Finance Company2%Maximum 20 times of salary
          External auditors, consultants and lawyers of a Finance CompanyNot allowedNot allowed

           

          13.4Where a Principal Shareholder is also a member of the board of directors of a Finance Company, Credit Exposures will be considered within the Principal Shareholders' Credit Exposure limits.
           

        • Article (14) Corporate Governance

          14.1A Finance Company must develop its own principles and policy for corporate governance, have them approved by its board of directors and provide the Central Bank with a copy thereof. The corporate governance policy must, at a minimum, include the following items:
           
          a.A description of the organizational structure, including all departments and positions as well as their duties and responsibilities;
           
          b.Controls for independence and segregation of duties;
           
          c.Roles, responsibilities, and composition of the board of directors and, if applicable, its committees;
           
          d.Remuneration and compensation policies;
           
          e.Conflict of interest controls;
           
          f.Integrity and transparency controls;
           
          g.Controls ensuring compliance with applicable laws and regulations;
           
          h.Methods for maintaining confidentiality of information;
           
          i.Controls for the protection of corporate assets; and
           
          j.Delegation of authority.
           
          Founding shareholders
           
          14.2Each founding shareholder must satisfy Fit and Proper requirements defined by the Central Bank. In particular, a founding shareholder must not have:
           
          a.Been convicted of any crime involving dishonor or dishonesty, or that involves violence;
           
          b.Failed to honor financial liabilities to any bank or creditor;
           
          c.Declared bankruptcy or failed to reach a settlement agreement with creditors;
           
          d.Had properties confiscated; or
           
          e.Been placed under court receivership, unless he has been rehabilitated or pardoned by the relevant authorities.
           
          14.3The number of founding shareholders of a Finance Company should be in line with the Commercial Companies Law.
           
          Responsibility of the board
           
          14.4Members of the board of directors of the Finance Company must act with integrity, exercising their Duty of Care and Duty of Loyalty.
           
          14.5Members of the board of directors of the Finance Company are responsible for ensuring effective control over the Finance Company’s entire business. Members of the board of directors of the Finance Company must ensure that a Finance Company has a robust corporate governance policy commensurate with its risk profile.
           
          14.6Members of the board of directors of the Finance Company are responsible for approving and overseeing implementation of the Finance Company’s strategic objectives and its risk management function, compliance function and internal and external audit.
           
          14.7Members of the board of directors of the Finance Company are responsible for the organizational structure of the Finance Company, including specifying the key responsibilities and authorities of the board and the Senior Management including the heads of the risk management, compliance and internal audit functions.
           
          14.8Members of the board of directors of the Finance Company are responsible for overseeing Senior Management, ensuring that the Finance Company’s activities are carried out in a manner consistent with the business strategy, corporate governance framework, remuneration and other policies approved by the board of directors of the Finance Company.
           
          Board composition and qualification
           
          14.9The board of directors of a Finance Company must have no fewer than five members. At least 60% of the board members must be experienced in the finance and banking business. At least 60% of board members of an Islamic Finance Company must have knowledge of the Islamic finance and banking business.
           
          14.10The majority of the board of directors of a Finance Company must be U.A.E. nationals. The board must be chaired by one of the board members who is a U.A.E. national.
           
          14.11All of the members of the board of directors must be non-executives. There must be no overlap between the function and role of the board and general management. A person holding a position in Senior Management must not hold a board position.
           
          14.12At least 1/3 of the members of the board of directors must be independent members in order to facilitate effective oversight of the Finance Company. Collectively, the board members must have knowledge of all significant businesses of the Finance Company. The board members must have an appropriate balance of skills, diversity and expertise commensurate with the size, complexity and risk profile of the Finance Company.
           
          14.13A Finance Company must have a clear and rigorous process for identifying, assessing and selecting candidates for the board of directors of the Finance Company. At a minimum, board members must meet the following Fit and Proper requirements:
           
          a.Possess the necessary knowledge, skills and experience; and
           
          b.Have sufficient time to fully discharge their responsibilities.
           
          14.14The board members of a Finance Company must satisfy Fit and Proper requirements defined by the Central Bank. In particular, a board member must not have:
           
          a.Served as an auditor of a Finance Company while concurrently serving in the board of directors of the same Finance Company;
           
          b.Been terminated from any senior executive position in a company engaged in financial activities on the basis of disciplinary matters or on the basis of a disciplinary action based on a court judgement;
           
          c.Been convicted of any crime involving dishonor or dishonesty, or that involves violence;
           
          d.Failed to honor financial liabilities to any bank or creditor;
           
          e.Declared bankruptcy or failed to reach a settlement agreement with creditors;
           
          f.Had properties confiscated; or
           
          g.Been placed under court receivership, unless he had been rehabilitated or pardoned by the relevant authorities.
           
          14.15A Finance Company must obtain approval from the Central Bank prior to nominating or appointing members to its board of directors.
           
          14.16A Finance Company must obtain approval from the Central Bank prior to any membership changes in its board of directors.
           
          Board committees
           
          14.17To cover areas requiring special expertise, the board of directors of a Finance Company must form board committees. Said committees must at a minimum include a separate board Audit Committee and a separate board Risk Management Committee. Where board committees are set up, they must be chaired by an Independent Member of the board of directors and must not be chaired by a member of the Senior Management or an external party.
           
          Credit committee
           
          14.18To review and approve substantial loans, the board of directors of a Finance Company is encouraged to establish a credit committee of no fewer than three members. Significant loans must be reviewed and approved by the board of directors. Finance Companies must decide on the definition of substantial and significant loans individually, based on the size of the Finance Company and its scope of activities.
           
          Sharia’a supervision committee of an Islamic Finance Company
           
          14.19The memorandum and articles of association of an Islamic Finance Company must state the appointment of a Sharia'a supervision committee, of no less than three members from among Islamic doctrinal specialists, who have previous experience in the area of Islamic financing.
           
          14.20The Sharia'a supervision committee must ensure that the conduct and transactions of an Islamic Finance Company are in accordance with Islamic Sharia'a provisions. The articles of association of an Islamic Finance Company must specify the method by which the said committee is formed and the manner in which it conducts its duties and functions.
           
          14.21The Sharia'a supervision committee must be responsible and accountable for all its decisions, views and opinions related to Sharia'a matters. While the board of directors of a Finance Company bears the ultimate responsibility and accountability on the overall governance of the Islamic Finance Company, the Central Bank expects the board of directors of a Finance Company to be guided by the Sharia'a supervision committee on compliance with all Sharia'a decisions, views and opinions applicable to the business of the Islamic Finance Company.
           
          14.22In case a dispute or conflict arises between the Sharia’a supervision committee and the management of the Finance Company, the committee must refer the matter to the Higher Sharia’a Authority for decision.
           
          14.23An Islamic Finance Company must ensure that its corporate governance framework adequately provides for:
           
          a.Compliance with Sharia'a provisions;
           
          b.The role of the Sharia'a supervision committee in the governance of the Islamic Finance Company;
           
          c.The rights of investment account holders and the processes and controls for protecting their rights; and
           
          d.Transparency of financial reporting in respect of investment accounts.
           
          14.24An Islamic Finance Company must ensure compliance with any direction or guidance issued by the Higher Sharia'a Authority with respect to its Sharia'a governance framework.
           
          14.25An Islamic Finance Company must immediately notify the Central Bank and the Higher Sharia'a Authority if it becomes aware of any material information that may negatively affect the Fitness and Probity of a Sharia'a supervision committee member.
           
          Senior Management
           
          14.26Any nominee for Senior Management must satisfy Fit and Proper requirements defined by the Central Bank. In particular, members of Senior Management must not have:
           
          a.Been dismissed from a previous job on the basis of disciplinary action;
           
          b.Been convicted in any crime involving dishonor or dishonesty, or that involves violence;
           
          c.Failed to honor financial liabilities to any bank or creditor;
           
          d.Declared bankruptcy or failed to reach a settlement agreement with creditors;
           
          e.Had properties confiscated; or
           
          f.Been placed under court receivership, unless they had been rehabilitated or pardoned by the relevant authorities.
           
          14.27The nominee for a Senior Management position of a Finance Company must, at a minimum, meet the following professional requirements:
           
          a.Be theoretically and practically familiar with the Financing business;
           
          b.Have appropriate academic and professional qualifications; and
           
          c.Adequate experience in the finance field for not less than ten years. The Central Bank may, at its own discretion, reduce periods of experience.
           
          14.28The nominee for a Senior Management position of an Islamic Finance Company must, at a minimum, meet the following professional requirements:
           
          a.Be theoretically and practically familiar with the Islamic Financing business;
           
          b.Have appropriate academic and professional qualification; and
           
          c.Adequate experience in the finance field for not less than ten years. The Central Bank may, at its own discretion, reduce periods of experience.
           
           On a case-by-case basis, the Central Bank shall have the right to exempt the nominees from such conditions upon the sole discretion of the Central Bank.
           
          14.29The post of the chief executive officer of a Finance Company or his equivalent must be separated from other roles within the group of companies that the Finance Company belongs to, with authorities and responsibilities defined by the board of directors. The chief executive officer or his equivalent is responsible for reporting significant transactions, major decisions and activities to the board of directors of the Finance Company.
           

        • Article (15) Internal policies and procedures

          15.1The Finance Company must establish written organizational policies and procedures, which must be reviewed annually and communicated to employees in a timely manner. At a minimum, the organizational policies and procedures must include the following items:
           
          a.Extension of credit;
           
          b.Risk management, assessment, handling, monitoring and disclosure thereof;
           
          c.Information technology and security;
           
          d.Internal audit;
           
          e.Compliance with relevant laws, regulations and instructions;
           
          f.Remuneration and incentives, including remuneration and incentives of Senior Management and remuneration of the board members; and
           
          g.Outsourcing of business activities.
           
          15.2In keeping with provisions of Article 10 of this Regulation, a Finance Company must demonstrate that it has developed sound risk management policies and controls and adequate internal policies and procedures for each product offered by the Finance Company.
           
          15.3A Finance Company must have an appropriate and balanced organizational structure, showing the main departments, sections, lines of reporting, authorities and responsibilities; the structure should be acceptable to the Central Bank.
           
          15.4The segregation of duties must be maintained to ensure the application of the generally accepted policies and procedures for protecting the assets and funds of a Finance Company, and avoiding fraud and embezzlement. Executive positions must not be combined in such a way that they might introduce a conflict of interest.
           
          Additional Requirements for internal policies and procedures of an Islamic Finance Company
           
          15.5The management of an Islamic Finance Company must be responsible for observing and implementing Sharia'a rulings and decisions made by the Sharia'a supervision committee. The Finance Company is required to have procedures in place to ensure that any Sharia'a issues arising in the course of business are referred to the Sharia'a supervision committee for decisions, views and opinions.
           
          15.6A Finance Company must adhere to the Fit and Proper criteria that govern appointment, replacement and termination of members and chairmen of the Sharia’a Supervision Committee.
           
          15.7An Islamic Finance Company must take the necessary steps to ensure that proper systems and controls are in place in order to ensure Sharia'a provisions are complied with at all times, including but not limited to the following:
           
          a.An Islamic Finance Company must prepare procedure manuals for the operations duly approved by their Sharia'a supervision committee as well as the board of directors or in the case of branches of an Islamic Finance Company operating in the U.A.E., by their head office;
           
          b.An Islamic Finance Company must prepare a full set of documents pertaining to the investment and financing products relating to its operations. The full set of the documents duly vetted by their Sharia'a supervision committee must be maintained by the company. Similarly, all documents in respect of new schemes offered by the Islamic Finance Company must also be prepared and maintained before the launching of the scheme;
           
          c.All documents, including, but not limited to, ledgers, registers, pay-inslips, cheques, receipts and passbooks used in an Islamic Finance Company must be appropriately marked, so as to easily distinguish them from the documents pertaining to a Conventional Finance Company; and
           
          d.An Islamic Finance Company must undertake an internal Sharia'a review on the operations of the company at least annually.
           
          Extension of credit
           
          15.8A Finance Company must draw up policies and procedures for Financing, which, at a minimum, must include the following items:
           
          a.classification of credit worthiness;
           
          b.Procedures for dealing with declining credit rating and non-performing loans;
           
          c.Acceptable collaterals and the basis for assessing its value;
           
          d.Monitoring, administration and enforcement of collateral; and
           
          e.Risk provisioning.
           
          15.9Finance Companies must establish and maintain regular procedures for classifying the loans and advances that they extend to their customers in accordance with the regulations and guidelines of the Central Bank. These requirements on the classification of loans and their provisions may occasionally be updated by the Central Bank.
           
          15.10Upon obtaining the borrower's consent, the Finance Company must review the consumer’s credit record to verify the consumer’s solvency, ability to repay and credit behavior and document such verification in a credit file.
           
          15.11A Finance Company must have a credit approval matrix for the extension of credit according to the type and amount of the credit. The credit approval matrix must be approved by the board of directors of the Finance Company. The decision to approve or reject credit must be in accordance with the authority granted in the credit approval matrix.
           
          15.12The Finance Company must follow a sound method with written, transparent and clear procedures to assess credit worthiness of the applicants and their ability to repay. The board of directors of the Finance Company must approve these procedures and review them at least once every two years and update the same if necessary. The Finance Company must apply these procedures before extending credit and document the same in the credit file.
           
          15.13Credit Exposure risks must be assessed and risk rated prior to making the decision to extend credit. The risk classification must be reviewed at least once a year.
           
          15.14The Finance Company must specify procedures for early detection of risks to identify credit exposures that manifests clear signs of increased risk and develop quantitative and qualitative indicators for early identification of risks.
           
          Risk management function
           
          15.15A Finance Company should establish a clear, written risk management policy that is approved by the board of directors of the Finance Company. The risk management policy must address all relevant risks, taking into account the full range of business activities conducted by the Finance Company. At a minimum, the policy must include the following risks:
           
          a.Credit risks;
           
          b.Market risks;
           
          c.Asset-liability mismatch risks;
           
          d.Liquidity risks; and
           
          e.Operational risks, including information technology and security risks.
           
          15.16The risk management function must be functionally independent of the risk generating business lines and is responsible for the design, maintenance and ongoing development of the risk framework within the Finance Company. The risk management function must not report hierarchically or functionally to any person or function that is directly responsible for risk generation. The risk management function must have appropriate access to the board of directors of a Finance Company.
           
          15.17A Finance Company must set appropriate procedures for the identification, assessment, management and monitoring of risks and prepare risk reports thereon.
           
          15.18A Finance Company must prepare a quarterly risk report to be discussed by the board of directors after being reviewed by Senior Management.
           
          Information Technology and Security
           
          15.19The technical facilities and systems of a Finance Company must be sufficient for the operational needs, business activities and risk exposure of the Finance Company.
           
          15.20A Finance Company must maintain all business documents, records and files in an orderly, transparent and safe manner and ensure the completion and periodic updating of these files. Said documents, records and files must be retained for at least a period of five years from the date of termination of the relationship with the customer.
           
          15.21Information technology systems and related processes must be developed to ensure data availability, integration, integrity and confidentiality. Such systems must be periodically assessed by the Finance Company in accordance with relevant regulations and standards and must be tested prior to launching and after introducing any modification thereto.
           
          15.22The Finance Company must use its information technology infrastructure to enhance its ability to retrieve all know-yourcustomer and transactions records in a timely manner.
           
          15.23The Finance Company must develop a business continuity plan that ensures alternative solutions that will enable the recommencement of operations within a reasonable time in the event that they are disrupted.
           
          Internal audit function
           
          15.24The Finance Company must have an internal audit function that reports directly to the board of directors of the Finance Company. This function must be independent and its employees must not be assigned any other responsibilities.
           
          15.25The internal audit function must operate according to a comprehensive audit plan. The audit plan must be approved by the board of directors of the Finance Company and reviewed annually. Major activities and operations, including those related to risk management and compliance must be audited at least annually.
           
          15.26The internal audit function must prepare and submit to the board of directors a written report on its activities on a quarterly basis.
           
          Compliance function
           
          15.27A Finance Company must comply with all applicable laws and regulations, decisions, instructions, directives, circulars, correspondence and policies. To prevent violations, a Finance Company must implement adequate measures and controls.
           
          15.28A Finance Company must have an independent compliance function that ensures the compliance of the Finance Company with all applicable laws, regulations, decisions, instructions, directives, circulars, correspondence and policies.
           
          15.29A Finance Company must create the role of a compliance officer, which has a direct reporting line to the board of directors of the Finance Company. The compliance officer must be appointed by the board of directors. The compliance officer must be independent in carrying out his assigned duties and must not be assigned any other responsibilities. The compliance officer must submit a quarterly report on compliance to the board of directors.
           
          15.30A Finance Company must have a board approved written compliance policy. This compliance policy sets out the powers, obligations and responsibilities of the compliance function, as well as compliance programs and related procedures, including arranging regular anti-money laundering / combating the financing of terrorism training programs for the staff.
           
          15.31The Finance Company must set adequate internal policies and procedures to combat financial crimes, specifically money laundering and terrorism financing. A Finance Company must report any suspicious transactions, activities or operations to the Financial Intelligence Unit at the Central Bank in a timely manner.
           
          Remuneration and incentives
           
          15.32The Finance Company must ensure that it has an adequate number of staff who are experienced and qualified to meet the operational needs, business activities and risks of the Finance Company. Staff remuneration and incentives must be fair, in line with the risk management strategy of the Finance Company and not give rise to any potential conflict of interest.
           
          Outsourcing
           
          15.33A Finance Company must ensure that all Outsourcing agreements include appropriate provisions for the safeguarding of confidential data. These include, but are not limited to, contractual provisions to ensure that a service provider in possession of confidential data may not provide any other party with access to the confidential data without first obtaining the specific authorization of the Finance Company.
           
          15.34A Finance Company must ensure that it retains ownership of all data provided to a service provider, including but not limited to confidential data and has unfettered access to all data, including the right of return of all data and records for the duration of and at the termination of any Outsourcing agreement.
           
          15.35Finance Companies must have a process for determining the materiality of outsourced business activities. The process must consider the potential of the outsourced activity, if disrupted, to adversely affect the Finance Company’s operations or ability to manage risks.
           
          15.36The Outsourcing of Material Business Activities must be approved by the board of directors of the Finance Company, a committee of the board or designated senior officers.
           
          15.37A Finance Company must apply for and receive a notice of non-objection by the Central Bank prior to entering into an agreement to outsource a Material Business Activity, whether to a related party or third party.
           
          15.38While all requests for non-objection will be considered on their individual merits, the Central Bank will not permit the Outsourcing to a third party of core activities, key management and control functions of the Finance Company including, at a minimum, the following items:
           
          a.Senior Management oversight;
           
          b.Credit management and decisions;
           
          c.Risk management;
           
          d.Compliance;
           
          e.Internal audit; and
           
          f.Management of the risk taking functions.
           
          15.39Every agreement governing an outsourced business activity must include an explicit provision giving the Central Bank, or an agent appointed by the Central Bank, access to the service provider. The provision must include the right to conduct on-site visits at the service provider if the Central Bank considers this necessary for supervisory purposes and require the service provider to provide directly to the Central Bank, or an agent appointed by the Central Bank, any data or information required for supervisory purposes, upon request by the Central Bank.
           
          15.40A Finance Company must not enter into an Outsourcing agreement with a third party or related party that involves the storage of Confidential Data outside of the U.A.E. A Finance Company may, however, enter into an Outsourcing agreement with a third party that involves the storage of Confidential Data in the Free Zones.
           
          15.41For any outsourced Material Business Activity, the internal audit function of the Finance Company must provide independent assurance similar to that required if the activity was undertaken by the Finance Company.
           
          15.42The internal audit function must regularly review and report to the board of directors of a Finance Company on compliance with the Outsourcing policies and procedures of the Finance Company.
           
          15.43For any outsourced Material Business Activity, the compliance function of the Finance Company must review and report to Senior Management or the board of directors of a Finance Company on the observance by the service providers of all applicable compliance policies of the Finance Company.
           
          15.44An Islamic Finance Company must ensure that its Outsourcing policies and arrangements are consistent with Sharia’a provisions.
           
          15.45An Islamic Finance Company must ensure that its policies and procedures for the assessment of any proposed Outsourcing arrangement specifically consider operational and reputational risks from failure by the service provider to adhere to Sharia’a provisions.
           
          15.46A Finance Company must report to the Central Bank on its Outsourcing arrangements in the format and frequency prescribed by the Central Bank.
           
          15.47A Finance Company must provide upon request any specific information with respect to Outsourcing arrangements that the Central Bank may require.
           
          15.48A Finance Company must immediately notify the Central Bank when it becomes aware of any material breach of the terms of an outsourcing agreement, or other development with respect to an outsourced business activity, that has, or is likely to have, a significant impact on operations, reputation or the financial condition of the Finance Company or otherwise lead to the disclosure of confidential information.
           

        • Article (16) Consumer Protection

          16.1The commercial name of a Finance Company must not include the terms "bank", "investment company", "commercial company" or any other term that might suggest anything outside the scope of the Financing activities outlined in Article 10 of this Regulation.
           
          16.2A Finance Company must provide its borrowers with sufficient and transparent information, including costs and risks associated with the loan, to enable the borrower to make an informed assessment of the suitability of the loan to their needs and financial circumstances.
           
          16.3A Finance Company must adhere to the Central Bank’s regulations regarding loans offered to customers. There should be transparency in preparing and publishing all fees, charges and interest rates (or profits) including the method of calculating interest / profit.
           
          16.4Borrowers should be provided with information setting out the total cost of the loan during the loan period. The borrower must sign each page of the loan documentation and be given a copy signed by both the Finance Company and the borrower.
           
          16.5A Finance Company must use official documents on all transactions when dealing with its customers.
           
          16.6A Finance Company must follow Central Bank Regulations pertaining to consumer protection. These Regulations are occasionally updated by the Central Bank
           

        • Article (17) Credit Reports

          17.1A Finance Company must strictly adhere to the following credit reporting requirements:
           
          a.Provide credit information of borrowers to a Credit Information Agency on at least a monthly basis unless otherwise required by the law or the Central Bank; and
           
          b.Request credit information of borrowers from a Credit Information Agency before extending credit to an individual borrower.
           

        • Article (18) Regulatory Reporting and Prior Approval from the Central Bank

          Reporting to the Central Bank
           
          18.1The financial year of the licensed Finance Company must commence on 1st January and end on the 31st of December (except in the year of formation, which commences on the registration of the Finance Company in the commercial registry and ends on the 31st of December of the next year, provided it does not exceed eighteen months).
           
          18.2A Finance Company must implement all applicable International Accounting Standards/International Financial Reporting Standards and provide the Central Bank with two copies of signed audited financial statements, including external auditor reports, before 31st March every year. The Central Bank will review the financial statements and give its approval for their publication.
           
          18.3A Finance Company must publish on its website or in a newspaper of broad circulation its audited annual accounts. Such publications must occur prior to 30th April of every year.
           
          18.4A Finance Company must provide the Central Bank with a list of its board members and their shareholding in the Finance Company annually, as well as an annual list of shareholders with shareholdings of 5% or more.
           
          18.5A Finance Company must provide the Central Bank with supervisory return forms on a regular basis, as specified by the Central Bank. For the purpose of calculating reporting requirements regarding Aggregate Capital Funds, Finance Companies must ensure that any capital increase has been validated by an external auditor.
           
          18.6A Finance Company must provide the Central Bank with any statements, information or statistics regarding any specific period required at any time; these should conform to the records of the company. All information shall be considered confidential and treated on that basis.
           
          Prior approval by the Central Bank
           
          18.7The licensed Finance Company must strictly adhere to the following:
           
          a.Not to make any changes to its name, legal form or capital without prior written approval from the Central Bank;
           
          b.Not to merge or consolidate with any other person or entity, without the prior written approval of the Central Bank;
           
          c.To conduct its business from independent and appropriate premises; relocation is not allowed without prior approval from the Central Bank;
           
          d.Not to open any branches except after obtaining prior approval from the Central Bank. In this case, consideration shall be given to the financial position of the Finance Company and its past compliance with regulatory requirements where applicable;
           
          e.Issue all correspondence and documentation in the name of the entity and duly signed by authorized persons;
           
          f.Make no amendments to its memorandum and articles of association without the approval of the Central Bank;
           
          g.Obtain prior approval from the Central Bank for the appointment of Senior Management;
           
          h.Obtain prior approval from the Central Bank before commencing any additional activities apart from those specified in Article 10.1 of this Regulation;
           
          i.Obtain prior approval from the Central Bank before commencing third party product distribution activities;
           
          j.Obtain prior non-objection from the Central Bank before contracting with an Agent;
           
          k.Obtain prior approval from the Central Bank before incorporating any subsidiary; and
           
          l.Not to incur any encumbrance on any of its assets without prior approval from the Central Bank.
           
          18.8Any changes in the Finance Company’s shareholdings of 5% or more require prior approval from the Central Bank.
           

        • Article (19) External Audit

          19.1A Finance Company must appoint a statutory external auditor acceptable to the Central Bank, maintain proper accounting records and submit statements concerning these records to the Central Bank on the required forms.
           
          19.2The person nominated as external auditor of a Finance Company should be theoretically and practically familiar with the finance business and should have relevant managerial experience.
           
          19.3A Finance Company must obtain approval from the Central Bank prior to appointing an external auditor. The Central Bank may require the Finance Company to appoint another auditor if the size and nature of the business of the Finance Company so requires.
           
          19.4A Finance Company must not provide financing, facilities or open any accounts for its external auditors.
           
          19.5A Finance Company must rotate their external audit firm at least every 6 years subject to the conduct of a procurement procedure. In addition, a Finance Company must rotate their external audit firm’s partner in charge of the audit every 3 years.
           
          19.6The Central Bank may require a Finance Company to replace its external auditor or change the partner of its external auditor or may appoint another external auditor at the expense of the Finance Company in the following cases:
           
          a.If required by the size and nature of its business;
           
          b.If the external auditor commits a violation of a professional nature;
           
          c.If there is a reason to believe that the external auditor has a conflict of interest; or
           
          d.If the integrity of the finance sector or governance considerations and the protection of stakeholders’ interest so requires.
           

        • Article (20) On-Site Examination

          20.1The Central Bank shall conduct periodic examinations of the business of the Finance Company to ensure the soundness of the financial position of the Finance Company and the application of the provisions of this Regulation as well as any other laws mentioned in this Regulation and instructions issued by the Central Bank.
           
          20.2The Central Bank may from time to time conduct examination of the Finance Company and of any branch or subsidiary operating in the U.A.E. or abroad to ensure the soundness of its financial position and compliance with the Articles of this Regulation and/or any other directives prescribed by the Central Bank.
           
          20.3Whenever the Central Bank has reason to believe that a person is conducting Financing activities without a License, the Central Bank may depute its examiner to check the books of accounts and records of that person in order to ascertain whether or not that person has violated or is violating any Articles of this Regulation.
           
          20.4For the purpose of an examination by the Central Bank, a Finance Company must provide full access to its accounts, records and documents and must give such information and facilities as may be required to conduct the examination.
           
          20.5If any accounts, records or documents as required for proper execution of an examination are not produced by the Finance Company, the board of directors and the Senior Management of the Finance Company shall be held responsible by the Central Bank.
           
          20.6Should the Central Bank's examination reveal that the operations of a Finance Company are unsound, the Central Bank may appoint a qualified person to advise and monitor the Finance Company. The advisor's emoluments shall be paid by the Finance Company.
           

      • PART II – Restricted Licence Finance Companies and Agents

        • Article (21) Licensing

          21.1Any person who intends to operate as a Restricted Licence Finance Company providing Short-Term Credit, must obtain a Licence to do so from the Central Bank.
           
          21.2An applicant for a License under this Regulation shall apply to the Central Bank in the form prescribed by the Central Bank.
           
          21.3Any applicant for a License under this Regulation must provide all information and documents required to assess the applicant’s suitability for a License.
           
          21.4The application and all supporting documents shall be in either Arabic or English. Documents in any other language shall be accompanied by a certified English or Arabic translation. Any financial figures should be presented in UAE Dirham (AED).
           
          21.5The applicant must disclose, at the time of the application, the sources of funding for its activities/ business and immediately inform the Central Bank of any material changes in its funding arrangements.
           
          21.6As part of the licensing process, an applicant for a License is required to submit a three (3) year business plan to the Central Bank with clear detail on the business model, lines of activity and governance arrangements.
           
          21.7The Central Bank may require the applicant to appoint a skilled person(s) to carry out a third party assessment of any aspect of the company’s proposed business model/systems. The findings and reports of the third party assessment will form part of the core licensing information required to be submitted by an applicant to the Central Bank.
           
          21.8The Central Bank shall communicate its decision considering the merits of the application and:
           
          a.Grant the License with or without conditions and limitations; or
           
          b.Reject the application, stating the reasons for rejecting the application.
           
          21.9A Restricted Licence Finance Company must commence the provision of Short-Term Credit within a maximum of twelve (12) months from the date of notification of approval of the License.
           
          21.10A Restricted Licence Finance Company which intends to amend, cease or suspend the provision of Short-Term Credit must apply to the Central Bank at least six months in advance, providing the reasons for such a cessation or suspension.
           
          21.11A Restricted Licence Finance Company must maintain a physical presence in the UAE.
           
          21.12The legal form of a Restricted Licence Finance Company must be in one of the forms stipulated in the Commercial Companies Law.
           
          21.13The commercial or trade name of a Restricted Licence Finance Company or Agent must comply with the restrictions of the Central Bank Law. The commercial and trade name shall not include any term that may indicate any activity other than the provision of Short-Term Credit in accordance with this Regulation.
           
          21.14A Restricted Licence Finance Company must not use the term Finance Company in its commercial or trade name. The trade name may include the term Short-Term Credit.
           
          21.15A Restricted Licence Finance Company must seek prior approval from the Central Bank for any changes to its name, legal form, memorandum or articles of association.
           
          21.16A Restricted Licence Finance Company must not engage in any regulated activity for which it is not licensed under the Central Bank Law and/or its Regulations.
           
          21.17As per Article (70) of the Central Bank Law, the Central Bank shall have the right, at any time, to impose, change or cancel any restriction or condition on any License granted under this Regulation.
           
          21.18As per Article (71) of the Central Bank Law, the Central Bank may, at any time, suspend, withdraw or revoke any Licence issued under this Regulation.
           
          21.19The Central Bank may take any action deemed appropriate to ensure the sound functioning of Licensees and/or the financial sector.
           
          21.20The Central Bank may, at its sole discretion, impose any penalty it deems appropriate on any person found to be carrying on Financing activities, including offering or granting Short-Term Credit, in the UAE, without a License.
           

        • Article (22) License Restrictions

          22.1A Restricted Licence Finance Company may only carry on the provisions of Short-Term Credit within the criteria set in Article (24) of this Regulation.
           
          22.2A Restricted Licence Finance Company’s activities must be funded exclusively through shareholder’s equity, retained earnings and/or debt instruments.
           
          22.3A Restricted Licence Finance Company is prohibited from accessing funds through Crowdfunding to finance its activities licensed under this Regulation.
           
          22.4A Restricted Licence Finance Company is prohibited from accepting deposits of any type.
           

        • Article (23) Permitted Activities

          23.1The maximum total Short-Term Credit extended to a Borrower by a Restricted Licence Finance Company or Agent, at any given time must not exceed Twenty Thousand Dirham (AED 20,000) or the total of three (3) months’ verified net income of the Borrower, whichever is lower (subject to any restrictions established in relevant UAE laws).
           
          23.2The maximum credit granted to a Borrower should be based on the results of affordability assessments conducted, given due consideration to the repayment ability, reducing the risk of overindebtedness and ensuring the fair treatment of Borrowers.
           
          23.3Restricted Licence Finance Companies or Agents must not charge interest on Short-Term Credit.
           
          23.4The total Fees, including late payment Fees charged on any Short-Term Credit by a Restricted Licence Finance Company or Agent, must not exceed 30% of the original credit amount. Therefore, the maximum recoverable amount from a Borrower on any Short-Term Credit, including where the credit is restructured, rescheduled, rolled-over or where there is any other deviation from the original agreement, must not total more that 130% of the value of the original credit granted to the Borrower. The Central Bank will review this requirement at regular intervals to ensure appropriateness of the maximum percentage and to adjust as needed, in the context of inter alia prevailing market conditions.
           
          23.5The repayment term of Short-Term Credit offered by a Restricted Licence Finance Company or an Agent must not exceed twelve (12) months from the date of the original agreement to lend, including any form of credit restructuring, rescheduling, roll-over or other form of deviation from the original agreement, affecting both the amount and the original term of the Short-Term Credit.
           
          23.6Restricted Licence Finance Companies and Agents must honour the original term of the Short-Term Credit and must not demand full payment prior to the end of the term of the credit agreed upon in the Borrower contract.
           
          23.7Borrowers’ assets, including movable and immovable property, must not be used by Restricted Licence Finance Companies or Agents to secure (whether fully or partially), any Short-Term Credit extended to a Borrower. Implementation of this requirement must be in alignment with Article (121 bis) of the Central Bank Law.
           

        • Article (24) Credit Reports

          24.1Restricted Licence Finance Companies and Agents must strictly adhere to the following credit reporting requirements:
           
          a.Provide credit information of Borrowers to the Credit Information Agency, based on the terms and conditions of the Credit Information Agency; and
           
          b.Request credit information of Borrowers from the Credit Information Agency, before extending credit to Borrowers in amounts of five thousand Dirham (AED 5,000) or higher.
           
          24.2The credit information of Borrrowers must not be shared or disclosed to any third party without the Borrower’s express consent to share with the identified party. Restricted Licence Finance Companies and Agents must ensure that they are in full compliance with all applicable legal requirements concerning data protection.
           
          24.3Access to and review of a Borrower’s Credit Report and other credit information by a Restricted Licence Finance Company or an Agent, including information from a Borrower’s employer must be conducted with the Borrower’s express consent.
           
          24.4Restricted Licence Finance Companies and Agents must disclose to Borrowers that credit information will be retrieved from (where applicable) and shared with the Credit Information Agency; and explain the implications of borrowing, late payment and default, on the Borrower’s Credit Report.
           
          24.5A Restricted Licence Finance Company or Agent must review Borrower information to conduct an affordability assessment to verify the Borrower's solvency and ability to repay and document such verification in a credit file. The credit information reviewed must incude the Borrower’s Credt Report in the case of credits granted in amounts of five thousand Dirham (AED 5,000) or more.
           
          24.6A Restricted Licence Finance Company or Agent must not grant a Short-Term Credit product with a credit limit that is unaffordable for the Borrower based on the results of the affordability assessment.
           
          24.7A Restricted Licence Finance Company’s or Agent’s review of a Borrower’s Credit Report must be conducted at the initiation of the credit relationship, prior to approving additional credit applications and before increasing the Borrower’s credit limit, if the total credit amount is five thousand Dirham (AED 5,000) or more.
           

        • Article (25) Minimum Capital Requirements

          25.1A Restricted Licence Finance Company must maintain a minimum level of capital on an ongoing basis.
           
          25.2A Restricted Licence Finance Company must hold and maintain the higher of:
           
          a.Aggregate Capital Funds of Twenty million Dirham (AED 20,000,000); or
           
          b.Aggregate Capital Funds equivalent to 5 per cent of the outstanding lending volume.
           
          25.3Aggregate Capital Funds consist of the following items:
           
          a.Paid-up capital;
           
          b.Reserves, excluding revaluation reserve; and
           
          c.Retained earnings.
           
          25.4The following items must be deducted from Aggregate Capital Funds:
           
          a.Accumulated losses; and
           
          b.Goodwill.
           
          25.5A Restricted Licence Finance Company must obtain prior approval from the Central Bank for any changes to its capital.
           
          25.6The Central Bank may, at its sole discretion, impose a higher minimum capital requirement on a Restricted Licence Finance Company, taking into consideration, inter alia, its size, the nature and scale of its operations and the volume of transactions.
           

        • Article (26) Governance

          26.1Restricted Licence Finance Companies and Agents must develop principles and policies for corporate governance; put in place an approved organisational and governance structure; and implement a Fit and Proper framework.
           
          26.2A Restricted Licence Finance Company must submit to the Central Bank, its organisational and governance structure; and provide updated copies in the event of significant changes to the structure(s).
           
          26.3Restricted Licence Finance Companies and Agents must ensure that they institute appropriate risk management frameworks; adequate internal controls; proper segregation of duties within the organisational structure; and that their operations are undertaken within the boundaries of clearly documented and internally audited policies, authorities and procedures.
           
          26.4Restricted Licence Finance Companies must obtain prior approval from the Central Bank prior to the appointment of any Authorized Individuals.
           
          26.5All individuals required to be approved as Authorized Individuals of a Restricted Licence Finance Company, including but not limited to members of the board of directors, Senior Management and persons in control functions, must be Fit and Proper and remain so for the duration of their appointment.
           
          26.6Restricted Licence Finance Companies must obtain approval from the Central Bank prior to any membership changes in its board of directors.
           
          26.7Restricted Licence Finance Companies and Agents shall have adequate staff who possess the requisite qualifications, competencies and skills to individually and collectively provide the range of skills and experience to manage their affairs in a sound and prudent manner.
           

        • Article (27) Risk Management and Internal Controls

          27.1Restricted Licence Finance Companies and Agents must have appropriate, approvcd risk governance frameworks in place that identify all material risks. This includes policies, processes, procedures, systems and controls to identify, measure, evaluate, monitor, report and control or mitigate material sources of risk on a timely basis.
           
          27.2Restricted Licence Finance Companies and Agents must ensure that they have instituted adequate internal controls, ensured proper segregation of duties within the organisational structure and that their operations are undertaken within the boundaries of clearly documented policies, authorities and procedures
           
          27.3Restricted Licence Finance Companies’ and Agents’ definition and assessment of material risks must take into account its risk profile, nature, size and complexity of its business and structure.
           
          27.4Restricted Licence Finance Companies and Agents must have in place mitigating action plans for key material risks and monitor and report on these on an ongoing basis.
           
          27.5Restricted Licence Finance Companies and Agents must institute adequate internal controls and management procedures in relation to cyber and fraud related risks.
           
          27.6Restricted Licence Finance Companies and Agents must have adequate resources to undertake proper underwriting of credits and compreshensive credit risk assessments of Borrowers prior to approving a Short-Term Credit.
           

        • Article (28) Compliance with Laws and Central Bank Regulations

          28.1Restricted Licence Finance Companies and Agents must institute adequate compliance arrangements to ensure that they remain in full compliance, where applicable, with relevant UAE laws, including the Central Bank Law and the Commercial Companies Law, this Regulation and any other applicable Regulations. Any breaches must be reported to the Central Bank.
           
          28.2The Central Bank may set additional prudential or other requirements for Restricted Licence Finance Companies and/or Agents. Such requirements may include, but are not limited to, restrictions on the size and scale of activities; requirements for specific governance or management arrangements; and/or capital adequacy requirements.
           
          28.3Restricted Licence Finance Companies and Agents must comply with the AML Law; and address money laundering and terrorist financing risks through appropriate preventive measures to deter abuse of the sector as a conduit for illicit funds, and detect money laundering and terrorist financing activities and report any suspicious transactions to the Financial Intelligence Unit at the Central Bank.
           
          28.4Restricted Licence Finance Companies and Agents must be operated prudently and with competence in a manner that will not adversely affect the interests of Borrowers. Restricted Licence Finance Companies and Agents must also comply with all applicable regulatory requirements for consumer protection of the Central Bank, per the CBUAE’s Consumer Protection Regulation (Circular No. 8 – 2020) and related standards which may be updated from time to time.
           
          28.5Restricted Licence Finance Companies and Agents must ensure that Outsourcing service providers, maintain an appropriate level of information security, risk management, and service delivery; and are in compliance with all relevant UAE laws and Central Bank Regulations applicable to their outsourced services.
           

        • Article (29) Transparency and Disclosures

          29.1Restricted Licence Finance Companies and Agents must, where applicable, comply with the requirements related to transparency and disclosures as articulated in the Central Bank’s Consumer Protection Regulation and Standards.
           
          29.2Restricted Licence Finance Companies and Agents must structure their activities in a clear, transparent format using plain language.
           
          29.3Advertising by Restricted Licence Finance Companies and Agents, and all information provided, must in all cases, indicate to Borrowers in a clear and conspicuous manner, that products being offered are Short-Term Credit.
           
          29.4To ensure that Borrowers are able to make an informed assessment of the suitability of the Short-Term Credit to their needs and financial circumstances, Restricted Licence Finance Companies and Agents must provide comprehensive and transparent information on key product features including, but not limited to, the total amount and expiry date of the credit, the process for accessing and repayment of the credit, related Fees, actions in the event of default, and Borrower rights.
           
          29.5Restricted Licence Finance Companies and Agents must disclose the terms and conditions of their business to Borrowers and articulate these within an enforceable contract; and disclose any subsequent updates to these terms and conditions.
           
          29.6Restricted Licence Finance Companies and Agents must disclose to Borrowers, the total Fees payable by the Borrower for the Short-Term Credit. The total amount/value of Fees must be disclosed as a total amount/value and as a percentage of the credit value. Restricted Licence Finance Companies and Agents must also provide clear examples of how the Fees will be calculated and applied, particularly as they relate to any late payment Fees.
           
          29.7Restricted Licence Finance Companies and Agents must advise Borrowers of the consequences of late payment and encourage them to make prompt settlement. Any applicable late payment Fees must be explicitly outlined to Borrowers, and must be reasonable.
           
          29.8The Borrower must sign the credit documentation and be provided with a copy signed by both the Restricted Licence Finance Company and/or the Agent, and the Borrower.
           
          29.9Restricted Licence Finance Companies and Agents must clearly disclose the available provisions for hardship assistance to Borrowers who experience financial difficulties, including suitable debt management solutions and the related policy on forbearance.
           
          29.10Restricted Licence Finance Companies and Agents must develop adequate collection policies and procedures, setting out actions to be taken against Borrowers who fail to make timely payments. The relevant details of these policies and procedures should be clearly communicated to Borrowers. The collections policies and procedures and related controls must meet the requirements of the Central Bank’s Consumer Protection Regulation and Standards.
           

        • Article (30) Dispute and Complaints Management

          30.1Restricted Licence Finance Companies and Agents must establish internal complaints handling, dispute handling and grievance redress mechanisms to deal with complaints from Borrowers or other parties in a timely and fair manner; and include the details of these mechanisms in their agreements.
           

        • Article (31) Reporting and Record Keeping

          31.1A Restricted Licence Finance Companies must submit reports to the Central Bank in the prescribed form, frequency and timeframe, which are established by the Central Bank from time to time.
           
          31.2Restricted Licence Finance Companies shall report the following to the Central Bank, at intervals stipulated by the Central Bank:
           
          a.Financial position;
           
          b.Description of its products and services;
           
          c.Description of its Fee structure;
           
          d.Description of its customer base;
           
          e.Details of its credit portfolio, including size and demographic allocation;
           
          f.Portfolio in arrears and defaults;
           
          g.Description of complaints received and resolution status of these complaints;
           
          h.All fraud related activity including internal, external and attempted cases of fraud;
           
          i.Details of vulnerabilities identified in the online systems and security;
           
          j.Details of contracts/Outsourcing arrangements ; and
           
          k.Any other information requested by the Central Bank.
           
          31.3A Restricted Licence Finance Company must immediately notify the Central Bank of any changes in its ownership and/or senior management.
           
          31.4Restricted Licence Finance Companies and Agents must maintain adequate and accurate books and records at all times in respect of their business, agreements, contracts and accounting records, in line with the relevant legal framework.
           
          31.5Restricted Licence Finance Companies and Agents must demarcate and segregate their business in respect of Licensed Financial Activities from any other business as it relates to the maintenance of separate accounting and accounts; and segregating files and other information.
           
          31.6Restricted Licence Finance Companies and Agents must maintain the strictest standards of Borrower data protection and information confidentiality and security, including implementing the necessary systems and controls to ensure such standards are met.
           
          31.7All documents, records and materials must be made available for inspection by the Central Bank from time to time at the request of the Central Bank and/or during the conduct of assessments, including Central Bank onsite examinations, other third party reviews requested by the Central Bank and/or special audits by an external auditor.
           
          31.8The records maintained by Restricted Licence Finance Companies and Agents must include:
           
          a.Historical records of information displayed online (websites / social media / any other media) and any print copies, if applicable, displaying the Restricted Licence Finance Company’s and Agent’s promotional communication, advertisements or online banners and tag lines;
           
          b.Internal policies, procedures and operating documents;
           
          c.Corporate and financial records and general ledger and sub-ledgers;
           
          d.Reports and statements issued to Borrowers and regulators;
           
          e.Any contracts, agreements, Credit Reports, communications and other documents related to Borrowers;
           
          f.Records demonstrating that the Restricted Licence Finance Company or Agent has control mechanisms in place to address complaints and grievances;
           
          g.Records of Borrowers’ complaints and resolution status;
           
          h.Management information, accounts and communications;
           
          i.Human resource records;
           
          j.Information technology architecture and security related documents; and
           
          k.Any other records stipulated by the Central Bank.
           

        • Article (32) Supervision and Examination

          32.1The Central Bank may carry out, or appoint a third party to carry out onsite examinations of a Restricted Licence Finance Company or an Agent, at any time it deems appropriate, to ensure adherence to UAE laws and Central Bank’s Regulations.
           

      • PART III – Finance Companies and Restricted Licence Finance Companies

        • Article (33) Enforcement and Sanctions

          33.1Violation of any provision of this Regulation and any accompanying Standards may be subject to supervisory action and administrative and financial sanctions as deemed appropriate by the Central Bank.
           
          33.2Supervisory action and administrative and financial sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of senior management or members of the board of directors, providing for the interim management of the Finance Company or the Restricted Licence Finance Company, imposition of fines or barring individuals from the UAE financial sector.
           

        • Article (34) Interpretation of Regulation

          34.1The Regulatory Development Department of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.
           

        • Article (35) Publication and Application

          35.1This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect on the day of its publication.
           
          35.2From the effective date of the Regulation, any person who is engaged in Financing activities and is not licensed by the Central Bank, must within ninety (90) days, apply to the Central Bank for a License or immediately cease undertaking all Financing activity.
           

        • Article (36) Transition Arrangements

          36.1The Central Bank may, at its sole discretion, and on a case by case basis, approve transitional arrangements for License applicants/Licensees to come into full compliance with the Regulation.
           

        • Article (37) Cancellation of Previous Regulation

          37.1This Regulation repeals and replaces the following Central Bank Regulation:
           
          a.The Finance Companies Regulation issued via Circular No. 112/2018, dated 24/04/2018.