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The New Banking Law: The UAE’s Most Significant Financial Regulatory Reform in a Decade
6 min 0 sec
May 20, 2026 (Edited)
a.awad@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 ‘New Banking Law’), issued on 8 September 2025, gazetted on 15 September 2025, and effective from 16 September 2025, marks the most consequential structural reform of the UAE’s financial regulatory framework in nearly a decade.
By repealing both Federal Decree-Law No. 14 of 2018 (the ‘Old Law’) and Federal Decree-Law No. 48 of 2023 on Insurance Business, the New Banking Law consolidates prudential and conduct supervision of banks, finance companies, insurers, reinsurers, takaful operators, payment service providers, and a newly expanded category of digital and virtual-asset payment operators under a single statute administered by the Central Bank of the UAE (CBUAE). The consolidation reflects a deliberate policy ambition: to deliver an integrated, internationally benchmarked supervisory and resolution regime fit for the full complexity of contemporary financial services.
An expanded licensing perimeter
The New Banking Law materially widens the scope of regulated activities. Open finance services, payment services utilising virtual assets, and stored value facilities are each brought within the CBUAE’s licensing perimeter for the first time at the statutory level.
Critically, a technology-neutral provision captures decentralised finance platforms, payment tokens, and decentralised protocols, regardless of the underlying technology. This provides a functional, future-proofed approach that closes potential regulatory arbitrage gaps as market structures continue to evolve.
The promotion prohibition is extended in step with this expanded perimeter. Any promotion of a licensed financial activity (whether relating to digital money, stored value, tokenised payments, or virtual-asset payment services) without a valid CBUAE licence is expressly prohibited; this prohibition is coupled with strengthened enforcement powers.
It should be noted that certain practical considerations may arise on a case-by-case basis in connection with the expanded licensing perimeter, particularly where cross-border activities are contemplated. Stakeholders should assess the implications of the new framework in light of their specific operational and jurisdictional circumstances.
Early intervention and resolution: A statutory toolkit
Perhaps the most structurally transformative development in the New Banking Law is the codification of a comprehensive early intervention and resolution regime, building on the Recovery Planning Regulation issued by the CBUAE on 30 October 2023, Circular No. 4/2023. The CBUAE is designated as the State Resolution Authority and is vested with a graduated toolkit spanning recovery through to full resolution.
Upon activation of early intervention, the CBUAE may:
- require implementation of recovery plan measures;
- impose supplemental capital and liquidity requirements;
- mandate strategic or structural changes;
- remove senior management;
- establish interim governance arrangements; and
- order a forced merger or acquisition.
Where resolution becomes necessary, the available tools include:
- appointment of resolution administrators;
- transfer or sale of assets and liabilities without shareholder or creditor consent;
- statutory bail-in (write-down or conversion of liabilities);
- bridging institutional and asset management vehicle tools;
- temporary stays and moratoria (with hard-wired protections for central counterparties and designated financial market infrastructures (FMIs); and
- restrictions on secured enforcement.
The creditor hierarchy is expressly codified, with customer, policyholder, and beneficiary claims ranking ahead of general unsecured creditors. This creates a significant protection for retail and SME depositors.
The framework achieves functional equivalence with leading international resolution regimes, including the EU’s Bank Recovery and Resolution Directive and UK and US equivalents, as settlement finality, netting, and collateral protections for designated FMIs take statutory precedence over general insolvency proceedings.
Certain calibrations, including pre- and post-resolution valuation standards, a “no-creditor-worse-off” safeguard, and quantitative loss-absorbing capacity metrics, are expected to be addressed through forthcoming CBUAE implementing regulations.
The interplay with the UAE Bankruptcy Law (Federal Law No. 51 of 2023), which carves out CBUAE-licensed institutions from its general scope, is pending the enactment of special sectoral legislation. The New Banking Law arguably constitutes that special legislation, vesting the CBUAE with the executable resolution authority the carve-out contemplated. The precise implications for close-out netting involving licensed financial institutions (LFIs) and the residual role of court-supervised proceedings merit careful ongoing analysis as implementing guidance is issued.
The digital dirham: Statutory footing of the CBDC
The New Banking Law reaffirms the CBUAE’s exclusive authority over retail and wholesale payment systems and extends it to digital money, payment tokenisation, stored value, and cross-border payments. The definition of “currency” encompass the dirham in digital form, providing an unambiguous statutory foundation for the digital dirham as part of the CBUAE’s central bank digital currency (CBDC) programme, and supporting the objectives of the CBUAE’s Financial Infrastructure Transformation initiative.
This eliminates prior legal uncertainty regarding the treatment of CBDCs and removes an obstacle to adoption in payment and settlement contexts. Virtual assets are defined separately and brought within scope only to the extent used in licensed payment services, preserving regulatory clarity without conflating them with legal tender.
Financial market infrastructure and cross-border recognition
The New Banking Law introduces a substantially enhanced framework for FMI regulation:
- a formal licensing regime for FMI operators and settlement institutions;
- a designation regime for systemically important FMIs; and
- settlement finality provisions rendering transfers through designated FMIs final, irrevocable, and irreversible.
FMI default arrangements prevail over general insolvency, and netting and collateral enforcement protections are preserved, notwithstanding resolution or liquidation proceedings. This aligns the UAE framework with the Principles for Financial Market Infrastructures published by the Committee on Payments and Market Infrastructures.
On cross-border recognition, the New Banking Law introduces a discretionary CBUAE power to recognise (in full or in part) or refuse to recognise resolution actions taken by a foreign or financial free-zone resolution authority. Whilst the UAE does not operate a general cross-border insolvency recognition regime, this LFI-specific mechanism is a meaningful tool for managing the extraterritorial effects of foreign resolution actions.
Where a foreign or free-zone institution with a UAE branch undergoes merger or liquidation in its home jurisdiction, home jurisdiction procedures may be applied to the UAE branch unless this would adversely affect UAE financial stability or impair UAE creditor protection.
Other notable developments
Customer protection
An independent complaints unit with legal personality and judge-chaired committees is provided with a detailed statutory basis, empowered to issue binding decisions on banking disputes up to AED 100,000. The unit’s remit is extended to the full spectrum of LFIs.
The prohibition on compound interest on customer facilities is reinforced, and enhanced provisions are introduced for depositor and policyholder protection funds, funded by levies on LFIs.
Enforcement
Administrative fines for LFIs rise dramatically from AED 2 million to AED 1 billion (or up to ten times the unjust gain). Fines for authorised individuals rise to AED 5 million. Sanctions are immediately enforceable, may be auto-debited from accounts, and may be publicised.
FMI-specific criminal offences attract imprisonment and fines of up to AED 10 million, with potential personal liability for responsible managers.
Designated functions
The fit-and-proper regime and designated functions framework are formalised and consolidated. These include express CBUAE powers to prohibit non-compliant individuals, and strengthened board and senior appointment governance requirements.
Islamic finance
The Higher Shari’a Authority (HSA) is retained and strengthened — its resolutions bind Islamic financial institutions and their internal Shari’a committees. Statutory relief is introduced for international financial institutions in connection with Shari’a-compliant financing structures, including dis-application of registration fees on assets forming part of such transactions.
ESG
A sustainable finance and environmental, social and governance (ESG) mandate is embedded in the CBUAE’s statutory functions for the first time, reflecting the growing prominence of climate risk within the global regulatory agenda.
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Administrative fines for LFIs rise dramatically from AED 2 million to AED 1 billion. Sanctions are immediately enforceable, may be auto-debited from accounts, and may be publicised.
Transitional arrangements and practical implications
Existing regulations, decisions, guidelines, and circulars issued under the Old Law and the 2023 Insurance Law remain in force until expressly superseded. LFIs have a one-year period from 16 September 2025 to bring their activities into conformity with the New Banking Law, with extension at the CBUAE’s discretion.
LFIs should treat the New Banking Law as a programmatic change requiring structured action across several areas:
- reviewing lending, treasury, derivatives, and collateral documentation in light of the new resolution tools and creditor hierarchy;
- aligning recovery and resolution plans with the CBUAE’s new statutory powers;
- updating governance frameworks for the strengthened designated functions regime;
- assessing licensing implications for open finance, virtual asset payment, and stored value activities;
- planning cross-border coordination for multinational groups; and
- reassessing regulatory risk exposure in light of the substantially enhanced sanctions regime.
Conclusion
The New Banking Law fundamentally resets the UAE’s financial regulatory architecture, placing the CBUAE at the head of a modern, integrated supervisory and resolution regime that spans traditional banking, insurance, digital currencies, virtual asset payments, and decentralised finance. The first wave of implementing regulation will be critical in giving practical effect to its ambitious statutory framework. LFIs and their advisers should monitor developments closely and engage proactively with the CBUAE’s implementation process as it unfolds.
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