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  • Banks’ Acquisition of Own Shares Regulation

    C 20/2021 Effective from 14/2/2022


    The Central Bank is pleased to announce the issuance of the “Banks’ Acquisition of Own Shares Regulation” (Circular 20/2021 - dated 21/12/2021).

    Article 93 (3) of the Decretal Federal Law No. (14) of 2018, as amended (the ‘Central Bank Law’) prohibits a bank from purchasing, acquiring, or dealing in their own shares, in excess of any ratios set by the Central Bank .

    In issuing this Regulation, the Central Bank is setting the relevant regulatory ratio to apply under Article 93(3) of the Central Bank Law.

    In accordance with the Regulation, a bank is not permitted to directly, or indirectly, purchase, acquire, buy back or hold any amount of its own shares exceeding 10% of the bank’s paid-up capital. In addition, prior approval of the Central Bank is required, except for where shares have been acquired by a bank in settlement of a debt.

    This Regulation was published in the Official Gazette on 14 January 2022 and will come into effect one month after the date of publication.

    Please bring this Regulation to the attention of the board of directors of your bank at the next board meeting.

     

    • Scope

      This Regulation applies to all Banks.

    • Objective

      The objective of this Regulation is to define the regulatory obligations that apply to Banks, relating to acquisitions or buy backs of their own shares.

    • Article (2): Central Bank prior approval required for banks' acquisition of own shares

      2.1 A Bank shall not directly or indirectly acquire, purchase, buy-back or deal in its own shares without prior written approval of the Central Bank, unless shares have devolved to it in accordance with Article 2.2 of this Regulation.

      2.2 In accordance with Article 93(3) of the Central Bank Law, where shares have devolved to a Bank in settlement of a debt, and the Bank is therefore holding its own shares exceeding the maximum limit prescribed in Article (3) of this Regulation, the Bank must sell the excess shares, within a period of two (2) years from date of acquisition.

      2.3 The Central Bank, in granting any approval under Article 2.1 of this Regulation, may request any information it requires in order to make an appropriate decision. The Central Bank, in granting any approval under Article 2.1 of this Regulation, may impose any limitations or conditions on the Bank that it considers appropriate.

      2.4 The Central Bank may, on application by a Bank in writing, extend the period referred to in Article 2.2 of this Regulation for such period and on such conditions as the Central Bank considers appropriate.

    • Article (3): Maximum limit

      3.1 A Bank shall not be permitted to directly or indirectly purchase, acquire, buy-back or hold any amount of its own shares exceeding ten percent (10%) of the Bank’s Paid Up Share Capital.

    • Article (4): Obligation to notify the Central Bank of breach of regulatory obligations

      4.1 Banks which breach or are likely to breach any provision as per this Regulation must immediately notify the Central Bank in writing.

    • Article (5): Enforcement & Sanctions

      5.1 Violation of any provision of this Regulation and any accompanying Standards may be subject to supervisory action and sanctions as deemed appropriate by the Central Bank including the measures stated in Article 44 (1) of the Central Bank Law “Protection of Licensed Financial Institutions”

    • Article (6): Interpretation of Regulation

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

    • Article (7): Publication & Effective Date

      7.1 This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect one month from the date of publication.