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Adequate Securities Under the 2025 Banking Law: Recent Abu Dhabi Judgments
3 min 31 sec
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m.khan@tamimi.com 
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Federal Decree-Law No. 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business (the 2025 Banking Law) is now in force, replacing Federal Decree-Law No. 14 of 2018 (as amended). Article 150 of the 2025 Banking Law carries forward the adequate securities requirement first introduced by Article 121 bis. It confirms that licensed financial institutions must obtain and maintain adequate guarantees for all types of credit facilities granted to natural persons and sole proprietorships, commensurate with the client’s income, any existing guarantees, and the amount of the requested facilities, as determined by the Central Bank.
The procedural bar on claims remains, in other words, that no claim, action, or defence can be accepted before judicial authorities or arbitral tribunals if filed by a licensed financial institution regarding such facilities without having obtained or maintained the required guarantees.
This legislative continuity means that the regulatory and judicial framework previously developed under Article 121 bis remains intact. Some of the recent Abu Dhabi Court of Cassation judgments have provided welcome clarification for banks on what constitutes adequate security and have drawn an important distinction between regulatory compliance and judicial enforceability.
Recent Abu Dhabi Court of Cassation judgments
Case No. 33-Commercial-2025-A-T (13 March 2025)
A bank’s claim to recover outstanding sums under a personal loan facility was dismissed at the first instance, on the basis that the loan exceeded permissible salary-based lending limits over 20 times. The Court of Cassation overturned that decision, holding that the central test under Article 121 bis is whether the bank has obtained adequate and recognised forms of security, not whether it has complied with every prudential or regulatory threshold.
The bank had secured the personal loan by way of a salary assignment, loan insurance, and a cheque covering the value of the facility. The Court held that these forms of collateral satisfied the statutory requirement. It is important to note that the Court drew a clear distinction between regulatory compliance and judicial enforceability. According to the Court, breaches of prudential regulations may attract regulatory consequences from the Central Bank, but do not render a claim inadmissible where adequate security exists.
Judgment No. 819 of 2025 (28 August 2025)
In a similar fact pattern, a bank’s claim to enforce a personal loan was dismissed at both the first instance and on appeal. This was based on the premise that the security obtained was inadequate and that the loan exceeded 20 times the borrower’s permissible salary limits. The bank argued that it held a salary certificate, credit insurance, and a single promissory cheque for the full facility amount, which together satisfied the requirements of Article 121 bis.
The Court of Cassation accepted the bank’s position. It relied expressly on Explanatory Circular No. 3 of 2023 (supplementing Circular No. 9 of 2022) and Article 7 of the 2011 consumer credit regulations as the normative benchmark for adequate security. The Court affirmed that a single cheque for the full facility amount is capable of constituting adequate security, notwithstanding that the regulation contemplates “a number” of cheques, because the cheque in form and substance secured the total indebtedness.
The Court further held that any breach of prudential guidance on the salary-to-loan multiple may have administrative or supervisory implications for the bank, but does not, in itself, prevent admissibility of the bank’s claim if adequate security exists. The Court quashed the inadmissibility ruling and remanded the matter for reconsideration on the merits.
The 28 August 2025 judgment: Consolidating the framework
The Abu Dhabi Court of Cassation’s judgment dated 28 August 2025 consolidates the application of Article 121 bis with the Central Bank’s regulatory requirements and the requirements under the 2011 consumer credit regulations. The Court established the following.
- Article 121 bis sets the admissibility threshold in a manner that, without adequate guarantees corresponding to income and facility size, would render claims
- Circular No. 3 of 2023 (supplementing Circular No. 9 of 2022) implements enforcement by restricting recovery and possible recourse to the accepted collateral, with universal application regardless of timing of contract or borrower category.
- The 2011 consumer credit regulations supply the substantive description of adequate security, specifically validating postdated cheques of up to 120% of the loan as a recognised form of security.
- Prudential breaches do not bar civil claims. Exceeding income-multiple caps may attract Central Bank administrative consequences, but will not render civil claims inadmissible where adequate security exists.
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The key test under Article 121 bis is whether the bank has obtained adequate and recognised forms of security, as opposed to complying with the prudential or regulatory thresholds.
Significance under the 2025 Banking Law
With Article 150 of the 2025 Banking Law now in force, these judicial pronouncements provide a welcome interpretation for banks. Notwithstanding the above interpretation, Article 150 is not materially different from Article 121 bis, and the judicial interpretation developed under the previous regime remains directly relevant. The introduction of the new Banking Law has not made any significant impact on the approach taken by the Abu Dhabi Courts.
Financial institutions should continue to ensure that security arrangements are documented, assessed, and aligned with Central Bank regulations, particularly in light of the 2011 consumer credit regulations and the Abu Dhabi Judicial Department’s Circulars Nos. 9 of 2022 and 3 of 2023, as these remain the operative reference points for determining adequacy. A package comprising salary evidence, loan insurance, and a cheque securing the full facility amount should meet the adequate security threshold in light of the aforementioned judgments.
From a regulatory standpoint, the adequate securities framework established under Article 121 bis is largely reflected in Article 150 of the 2025 Banking Law. The Abu Dhabi Court of Cassation’s recent judgments provide guiding principles under the Central Bank regulations on satisfying the adequacy threshold, with claims being admissible despite the underlying facility exceeding prudential lending limits.
The distinction between regulatory compliance and judicial enforceability offers operational certainty for lenders that prudential violations are dealt with administratively by the Central Bank, not through the dismissal of civil proceedings. At the same time, enforcement remains confined to the scope of the accepted guarantees, preserving the protective purpose of the provision for borrowers.
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