Finance Companies Regulation

CBUAE Classification: Public Finance Companies Regulation

CBUAE Classification: Public
Table of Contents
Page
Subject
Introduction) 1 (Article المادة )1( مقدمـــة 5 المادة )2( الهدف 6 Objective) 2 (Article المادة )3( نطاق التطبيق 6 Application) 3 (Article المادة )4( تعريفات 7 Definitions) 4 (Article المادة )5( متطلبات ملغاة وأحكام عامة 14 and Requirements Superceded General Provisions
Article (5)
PART I
المادة )6( التقدم بطلب للحصول على الترخيص 15 License A for Applying) 6 (Article
Article (7) Scope of License 19 الترخيص نطاق( 7 )المادة
المادة )8( اإلخطار بالموافقة أو الرفض 19 or Approval of Notification Refusal
Article (8)
المادة )9( تعديل أو إلغاء أو تقييد الترخيص 19 ,Amendment License Cancellation or Restriction
Article (9)
22 Activities Permitted) 10 (Article ّ ) األنشطة المصر المادة )10 ح بها المادة )11( متطلبات الحد األدنى لرأس المال 28 Capital Minimum Requirements
Article (11)
المادة )12( متطلبات السيولة 30 Requirements Liquidity) 12 (Article المادة )13( القيود على التعرضات االئتمانية 31 Restrictions Exposure Credit) 13 (Article المادة )14( الحوكمة المؤسسية 32 Governance Corporate) 14 (Article Procedures & Policies Internal) 15 (Article المادة )15( السياسات واإلجراءات الداخلية 41 المادة )16( حماية المستهلك 51 Protection Consumer) 16 (Article Credit Report 52 االئتمانية التقارير( 17 )المادة Article (17) s Regulatory Reporting and 53 Prior Approval from the Central Bank
Article (18)
المادة )19( التدقيق الخارجي 56 Audit External) 19 (Article On 57 الميداني التفتيش( 20 )المادة Article (20) -Site Examination

CBUAE Classification: Public
PART II
المـادة )21( الترخيص 59 Licensing) 21 (Article المــادة )22( قيــود الترخيص 62 Restrictions License) 22 (Article ّ
Article (23 Permitted Activities 62 المصـــ األنشـــطة( (
( المـادة )24( التقارير االئتمـــانية 64 Reports Credit 24 (Article Requirements
Article (25)
( المــادة )26( الحوكمــــة 66 Governance 26 (Article المــادة )27( إدارة المخاطر والضوابط الداخلية 68 Internal and Management Risk Controls
Article (27)
Compliance with Laws and 69 Central Bank Regulations
Article (28)
Article (29 Transparency and Disclosures 70 واإلفصاح الشفافية( 29 )المــادة(
المــادة )30( إدارة النزاعات والشكــاوى 72 Complaints and Dispute Management
Article (30)
( المــادة )31( رفع التقارير وحفظ السجالت 72 Keeping Record and Reporting 31 (Article
Article (32) Supervision and Examination 75 والتفتيش االشــــراف( 32 )المــادة
Part III
Article (33 Enforcement and Sanctions 76 والعقوبــات اإلنفـــاذ( 33 )المــادة(
76 النظـام تفسير( 34 )المــادة Article (34) Interpretation of Regulation
Article (35 Publication and Application 76 والتطــــــبيق النشــــــر( 35 )المــادة(
( المــادة )36( ترتيبات انتقاليــة 77 Arrangements Transition 36 (Article المـادة )37( إلغاء النظام السابق 77 Previous of Cancellation Regulation
Article (37)

CBUAE Classification: Public نظام شركات التمويل Regulation Companies Finance --------------------------------------------------------------------------------------------------------------------------------- Circular No: 3/2023 Date: 23/05/2023 To: All Finance Companies and Restricted Licence Finance Companies Subject: Finance Companies and Restricted Licence Finance Companies The Board of Directors of the Central Bank, المركزي؛ المصرف إدارة مجلس 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 AntiMoney 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: :يلي ما قرر

CBUAE Classification: Public المادة )1( (1) Article مقدمـــــــــــــة Introduction The 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. 1.1 In introducing this Regulation the Central Bank wishes to ensure that Finance Companies and Restricted Licence Finance Companies in the U.A.E. are:
1.2
Operating within transparent and well-defined organizational structures and operations; a. Prudently managed within a framework of permissible activities; and b. Equipped with the necessary financial resources and internal risk management systems. c. This 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 ShortTerm Credit. The following are outside of the scope of this Regulation:
1.3
Short-Term Credit activities conducted directly between Juridical Persons and not conducted by way of business; a. Any credit activity, whereby the payment to the vendor directly by the purchaser of a good or service is b.

CBUAE Classification: Public completed on an instalment basis and not conducted by way of business; and ج. وأنشطة التخصيم و/أو التأجير التمويلي. Lease Finance or/and Factoring activities. c.
Article (2)
Objective
The 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:
2.1
Protecting the customers of Finance Companies and Restricted Licence Finance Companies; a. Protecting Finance Companies and Restricted Licence Finance Companies; and b. ج. وتعزيز االستقرار العام للقطاع المالي. the of stability overall the Enhancing financial sector. c. This Regulation is issued by the Central Bank pursuant to the powers vested in the Central Bank Law. 2.2 Where 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. 2.3 المادة )3( (3) Article التطـــــبيق Application This 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 3.1

CBUAE Classification: Public Finance Company operating in the U.A.E. shall be regarded together as one Licensee.
Part I of this Regulation applies fully to
Finance Companies with the exception of Restricted Licence Finance Companies. 3.2
Part 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. 3.3
Part III of this Regulation applies fully to
Finance Companies and Restricted Licence Finance Companies. 3.4 المادة )4( (4) Article تعريفات Definitions The following terms and phrases shall have the definitions assigned to them for the purpose of this Regulation:
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; a. 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; b. 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, c.

CBUAE Classification: Public borrowings from other financial institutions, issuing of bonds and other Islamic Finance debt instruments; Aggregate Liabilities: the total amount of onbalance sheet and off-balance sheet liabilities of a Finance Company; d. 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; e. Authorized Individual: any natural person authorized in accordance with the provisions of the Central Bank Law, to carry on any of the Designated Functions; f. 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; g. Borrower: a UAE resident Person who is granted a Short-Term Credit; h. Central Bank: the Central Bank of the United Arab Emirates; i. Central Bank Law: Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organisation of Financial Institutions and Activities, as amended; j. Commercial Companies Law: Federal Decree Law No. 32 of 2021 on Commercial Companies, as amended; k.

CBUAE Classification: Public l. m. n. o. p. q. 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; 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; 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; Credit Information Agency: Al Etihad Credit Bureau and any credit information agency established for the purpose of credit reporting requirements in the UAE; Credit Report: is a collection of historical credit data from various financial institutions, utility companies, government, etc., on individuals and companies in the UAE; Crowdfunding: is solicitation of funds from persons through a platform for a specific purpose; Designated Functions: functions of the Authorized Individual at, or for the benefit of, a Licensee of influential nature on the institution’s activities. r. ;

CBUAE Classification: Public 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; s. Duty of Loyalty: the duty of a member of the board of directors to act in the interest of the Finance Company; t. 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; u. Fee: Any fees, charges, penalties and commissions incurred on a product and/or service by a Borrower; v. 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; w. Financing: permitted activities as referred to in
Article 10 of this Regulation;
x.
Finance Company: a conventional finance company and/or an Islamic Finance Company; y. 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; z.

CBUAE Classification: Public Foreign Funding: any borrowing or acceptance of deposits from any corporate entity incorporated outside of the U.A.E. and its free zones; aa. Free Zone: all free zones in the UAE except the financial free zones; ab. 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; ac. 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; ad. 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; ae. 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.; af. License: authorization issued by the Central Bank to conduct the business of Finance ag.

CBUAE Classification: Public Companies or Restricted Licence Finance Companies; Licensee: a Juridical Person licensed by the Central Bank to conduct Financing activities per the provisions of this Regulation; ah. 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; ai. 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; aj. أ.ط. الشركة األم: أي كيان )"الكيان األول"( الذي: ('entity first 'the (entity an :Company Parent which:
ak. holds a majority of the voting rights in another entity (the 'second entity'); 1. 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 2. 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. 3. أو؛ ;or if the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity. 4. Principal Shareholder: any shareholder of a Finance Company who owns, directly or indirectly, 5% or more of shareholdings of a Finance Company; al.

CBUAE Classification: Public Regulations: any resolution, regulation, circular, rule, standard or notice issued by the Central Bank; am. أ.ل. كيانات ذات صلة: أي مما يلي: :following the of any :Entities Related .an 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 1. 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; 2. Restricted Licence Finance Company: a Juridical Person licensed by the Central Bank to conduct the licensed financial activity of granting Short-Term Credit only; ao. 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; ap. 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 aq.

CBUAE Classification: Public services, without interest being charged nor a lien being placed against collateral nor a security deposit being required from the Borrower; Subsidiary: an entity (the 'first entity') is a subsidiary of a Finance Company (the 'second entity') if the second entity:
ar. holds a majority of the voting rights in the first entity; 1. 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 2. 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. 3. أو؛ ;or if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity; 4. U.A.E. Banks: all banks licensed by the Central Bank. as. المادة )5( (5) Article Superseded Requirements and General Provisions عامــة وأحكام ملغاة متطلبات This Regulation replaces all previous Central Bank regulations with respect to Finance Companies including the following:
5.1
األنظمة األحكــام Provisions Regulations جميع المواد articles All Central Bank Board of Directors' Resolution No. 58/3/96 regarding the regulation for finance companies and its amendments جميع المواد articles All Central Bank Board of Directors' Resolution No. 165/6/2004 regarding the regulation for finance companies which conduct their business per Islamic Sharia'a Principles .

CBUAE Classification: Public
Part I - Finance Companies (does not apply to Restricted Licence Finance Companies)
المادة )6( (6) Article
التقدم بطلب الحصول على ترخيص License a for Applying The conducting of Financing activities in the U.A.E. is prohibited unless licensed by the Central Bank to do so. 6.1 Conducting 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
A 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. 6.2.1 A 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:
6.2.2
Financing activities and products to be launched; a. Estimated financial statements, projected annual revenue and expenses, financial margins and b.

CBUAE Classification: Public targeted growth rates, taking into account Central Bank requirements according to
Article 11 and Article 12 of this
Regulation;
Projected start-up costs and financing thereof; c. Projected ongoing financing of operations; d. e. The risk factors; المخاطر؛ عوامل .هـ A summary of the corporate structure, legal form and corporate governance standards adopted by the Finance Company; f. Branches to be established by the Finance Company; and g. 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. h. The 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 6.2.3

CBUAE Classification: Public 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. Organizational structure showing the main departments, sections, lines of reporting, authorities and responsibilities. This structure should be appropriate, balanced, and acceptable to the Central Bank. 6.2.4 Curriculum vitae of persons recommended for board of directors and Senior Management positions. The Central Bank may decide to interview nominees. 6.2.5 A 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. 6.2.6 A 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:
6.2.7

CBUAE Classification: Public Payment of the required minimum amount of paid-up capital in cash; a. ب. سحب طلب الترخيص؛ License the of Withdrawal application; or b. Rejection of the License application by the Central Bank. c. An 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. 6.2.8 An 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. 6.2.9 Any other information and/or documents requested by the Central Bank for the purpose of deciding on the application for a License. 6.2.10 The 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. 6.3 The 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. 6.4

CBUAE Classification: Public المادة )7( (7) Article Scope of License الترخيص نطاق The 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. 7.1 The 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. 7.2 The License shall contain the terms deemed appropriate by the Central Bank. 7.3 The Central Bank may take any action deemed appropriate to ensure the sound functioning of the Finance Companies. 7.4 المادة )8( (8) Article Notification of Approval or Refusal الرفض أو بالموافقة اإلخطار The Central Bank may approve or refuse the License application after reviewing the application and obtaining all requested information. 8.1 The 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. 8.2
Article (9)
License Amendment, Cancellation or Restriction The Central Bank may, at any time, through a decision by its board, cancel, change, restrict, impose or withdraw any condition imposed on 9.1

CBUAE Classification: Public 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. The Central Bank may, through a decision by its board, revoke or withdraw a License of a Finance Company in the following cases:
9.2

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; a. 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; b. 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; c. If an order to liquidate the business of the Finance Company or of its Parent Company is issued by any competent judicial authority; d.

CBUAE Classification: Public If a court receiver, or any other similar officer is appointed to oversee the business of the Finance Company; e. و. إذا صدر حكم بإفالس شركة التمويل؛ the against order bankruptcy a If Finance Company is issued; f. If the Finance Company has not commenced operations within twelve months from the date of notification of approval of the License; g. If the Finance Company ceases to operate for a period of twelve consecutive months; h. 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; i. If the concerned local authorities have withdrawn any licenses granted by them to the Finance Company; j. If the Finance Company conducts any business activity from premises other than those approved by the Central Bank; k. If the Senior Management of the Finance Company is not deemed Fit and Proper; and l. In any additional case determined by the Central Bank at its sole discretion. m. A 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. 9.3 Any Finance Company that fails to comply with the AML Law and regulations and any other resolutions or instructions issued by the 9.4

CBUAE Classification: Public Central Bank in this regard, will be penalized in accordance with the prevailing laws and regulations. In 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. 9.5 المادة )10( (10) Article األنشطة المصرح بها activities Permitted A company can apply for a License to conduct one or more of the following types of activities:
10.1
Retail finance, including personal loans, credit cards, vehicle loans and Short-Term Credit; a. Mortgage finance, including residential mortgages and commercial mortgages; b. Wholesale finance, including loans to large corporate borrowers, small and medium-sized enterprises, microfinancing, finance and operating leasing and wage protection schemes; c. d. Pre-paid cards; and الدفع؛ مسبقة البطاقات .د 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. e. The licensing application must state the products within each activity that the Finance Company intends to offer to its customers.

CBUAE Classification: Public The board of the Central Bank can review the list of permitted activities specified in Article
10.1 of this Regulation and amend it.
10.2
The financing activities of an Islamic Finance Company are those provided under Article 10.1 subject to compliance with Islamic Sharia'a provisions. 10.3 A 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. 10.4 A 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. 10.5 A Finance Company must have its License updated in order to conduct any activity outside of those specified in the License of the Finance Company. 10.6 A 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. 10.7 Consistent 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. 10.8 A Finance Company may apply to the Central Bank for non-objection to partner with an 10.9

CBUAE Classification: Public 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. The Finance Company’s partnership with an Agent may only involve:
10.10
The Agent offering the ShortTerm Credit products and services of and funded by the Finance Company to Borrowers; and/or a. The Agent granting Short-Term Credit products to Borrowers, which are fully funded by the Agent. b. Consistent 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:
10.11
Escrow accounts (pool accounts) should be ring-fenced from deposits of the Finance Company; a. The U.A.E. Bank remains responsible for anti-money laundering / combating the financing of terrorism compliance and reporting functions; b. The U.A.E. Bank remains responsible for ensuring that appropriate systems and controls are in place to monitor all transactions; c.

CBUAE Classification: Public The board of directors of the Finance Company should oversee the business risks; d. 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; e. 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; f. 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; g. The Finance Company should ensure that procedures are in place on pool account operation, reconciliation controls and independent audit reviews; and h. The Finance Company must abide by all relevant laws and regulations at all times, in this regard. i. In 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:
10.12
They are term deposits only, with a minimum tenor of thirty days; a. Any deposit accepted is subject to a robust asset and liability management; and b.

CBUAE Classification: Public A single party deposit does not exceed 20% of the total amount of all accepted deposits and certificates of deposits of a Finance Company. c. A 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:
10.13
أ. شركات الوساطة؛ ;companies Brokerage .a b. Money exchange companies; الصرافة؛ شركات .ب
c. U.A.E. Banks; and و اإلمارات؛ بنوك .ج
د. شركات التمويل. .Companies Finance .d Any 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. 10.14 Any 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. 10.15 A Finance Company may place deposits in U.A.E. Banks and obtain certificates of deposit from U.A.E. Banks provided that:
10.16
The number of U.A.E. Banks, in which the Finance Company places its deposits is greater than or equal to four; and a. Any such deposit or certificate of deposit placed in any U.A.E. Bank does not exceed 10% of the Aggregate b.

CBUAE Classification: Public Capital Funds of the Finance Company. A 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. 10.17 A 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. 10.18 A Finance Company is prohibited from conducting any money-exchange business and from entering into any unhedged foreign exchange contracts. 10.19 A Finance Company must not purchase or acquire any immovable property, except for immovable property that may be used as premises for its operations. 10.20
Article 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. 10.21
Article 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. 10.22

CBUAE Classification: Public
Article 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. 10.23 A Finance Company must not engage in any activity for which it is not licensed under applicable laws and regulations. 10.24 المادة )11( (11) Article متطلبات الحد األدنى لرأس المال Requirements Capital Minimum 1-11 يتكون إجمالي األموال الرأسمالية من البنود التالية: the of consist funds capital Aggregate following items:
11.1
أ. رأس المال المدفوع؛ ;capital up-Paid .a ب. االحتياطي، باستثناء احتياطي إعادة التقييم؛ revaluation excluding ,Reserves reserve; and b. ج. واألرباح المحتجزة. .earnings Retained .c The following items must be deducted from aggregate capital funds:
a. Accumulated losses; and b. Goodwill. 11.2 The minimum required paid-up capital for a Finance Company is 150 million United Arab Emirates Dirham. 11.3 In 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. 11.4 U.A.E. national ownership of a Finance Company must comprise at least 60% of total paid-up capital. 11.5

CBUAE Classification: Public The 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:
11.6
أ. الضمانات النقدية؛ ;collaterals Cash .a Bank guarantees from U.A.E. Banks; and b. ج. والضمانات السيادية. .guarantees Sovereign .c The items listed under the letters a, b and c of this Article must be legally enforceable. A 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. 11.7 Shareholders 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. 11.8 A 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. 11.9

CBUAE Classification: Public المادة )12( (12) Article متطلبات السيولة Requirements Liquidity 1-12 يجوز اعتبار البنود التالية أصوًال سائلة: as considered be may items following The liquid assets:
12.1 a. Cash held in a U.A.E. Bank; اإلمارات؛ بنوك أحد لدى المودع النقد .أ
Certificates of deposit issued by the Central Bank held via a U.A.E. Bank; b. Short-term deposits with a U.A.E. Bank with maturity up to 30 days; and c. UAE Federal and local government bonds, which must not exceed 30% of the total amount of liquid assets. d. Encumbered cash held as collateral by a Finance Company is not considered as liquid assets. To 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:
12.2
أ. ضمانات نقدية؛ ;collaterals Cash .a ب. ضمانات بنكية صادرة من بنوك اإلمارات؛ ;Banks .E.A.U from guarantees Bank and b. ج. وضمانات سيادية. .guarantees Sovereign .c . The items listed under the letters a, b and c of this Article must be legally enforceable. Consistent 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. 12.3

CBUAE Classification: Public Customer deposits of a Finance Company are not subject to cash reserve requirements. 12.4 المادة )13( (13) Article القيود على التعرض االئتماني Restrictions Exposure Credit A 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:
13.1
أ. المخصصات؛ ;Provisions .a ب. الضمانات النقدية؛ ;collaterals Cash .b Bank guarantees from U.A.E. Banks; and c. د. والضمانات السيادية. .guarantees Sovereign .d . The items listed under the letters b, c and d of this Article must be legally enforceable. The aggregate amount of Large Credit Exposures must not exceed 100% of the Aggregate Capital Funds of a Finance Company. 13.2 In addition to Article 13.2, the Central Bank has defined maximum permissible Credit Exposure limits, as shown in Table 1 below. 13.3

CBUAE Classification: Public الجـــدول :1 الحدود القصوى للتعرض االئتماني Limits Exposure Credit Maximum 1: Table Individual percentage of Aggregate Capital Funds Aggregate percentage of Aggregate Capital Funds Borrower single A المقترض الواحد ال ينطبق %10 10% applicable Not borrower ذات صلة ال ينطبق %15 15% applicable Not A group of Related Entities Principal Shareholder s and their Related Entities 20% 10% %10 %20 Subsidiaries and Affiliates of a Finance Company Board غير مسموح به غير مسموح به allowed Not allowed Not اإلدارة members Maximum 20 times of salary 2% Employees of the Finance Company غير مسموح به غير مسموح به allowed Not allowed Not External auditors, consultants and lawyers of a Finance Company Where 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. 13.4 المادة )14( (14) Article الحوكمة المؤسسية Governance Corporate A 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 14.1

CBUAE Classification: Public policy must, at a minimum, include the following items:
A description of the organizational structure, including all departments and positions as well as their duties and responsibilities; a. Controls for independence and segregation of duties; b. Roles, responsibilities, and composition of the board of directors and, if applicable, its committees; c. د. سياسات المخصصات والتعويضات؛ compensation and Remuneration policies; d. e. Conflict of interest controls; المصالح؛ تضارب ضوابط .هـ f. Integrity and transparency controls; والشفافية؛ النزاهة ضوابط .و Controls ensuring compliance with applicable laws and regulations; g. ح. منهجية الحفاظ على سرية المعلومات؛ maintaining for Methods confidentiality of information; h. ط. ضوابط حماية األصول المؤسسية؛ of protection the for Controls corporate assets; and i. j. Delegation of authority. .الصالحيات وتفويض .ي المساھمون المؤسسون shareholders Founding Each founding shareholder must satisfy Fit and Proper requirements defined by the Central Bank. In particular, a founding shareholder must not have:
14.2
Been convicted of any crime involving dishonor or dishonesty, or that involves violence; a.

CBUAE Classification: Public Failed to honor financial liabilities to any bank or creditor; b. Declared bankruptcy or failed to reach a settlement agreement with creditors; c. د. قد تمت مصادرة ممتلكاته؛ or; confiscated properties Had .d Been placed under court receivership, unless he has been rehabilitated or pardoned by the relevant authorities. e. The number of founding shareholders of a Finance Company should be in line with the Commercial Companies Law. 14.3 Responsibility of the board الإدارة مجلس مسؤولیة Members of the board of directors of the Finance Company must act with integrity, exercising their Duty of Care and Duty of Loyalty. 14.4 Members 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. 14.5 Members 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. 14.6 Members 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 14.7

CBUAE Classification: Public heads of the risk management, compliance and internal audit functions. Members 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. 14.8 تركیبة ومؤھلات مجلس الإدارة qualification and composition Board The 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. 14.9 The 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. 14.10 All 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. 14.11 At 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, 14.12

CBUAE Classification: Public complexity and risk profile of the Finance Company. A 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:
14.13
Possess the necessary knowledge, skills and experience; and a. Have sufficient time to fully discharge their responsibilities. b. The 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:
14.14
Served as an auditor of a Finance Company while concurrently serving in the board of directors of the same Finance Company; a. 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; b. Been convicted of 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. f. Had properties confiscated; or ممتلكاته؛ مصادرة تمت .و

CBUAE Classification: Public Been placed under court receivership, unless he had been rehabilitated or pardoned by the relevant authorities. g. A Finance Company must obtain approval from the Central Bank prior to nominating or appointing members to its board of directors. 14.15 A Finance Company must obtain approval from the Central Bank prior to any membership changes in its board of directors. 14.16 لجان مجلس اإلدارة committees Board To 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. 14.17 لجنة االئتمان committee Credit To 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. 14.18 اإلسالمية التمويل لشركة الشرعية الرقابة لجنة Sharia’a supervision committee of an Islamic Finance Company The 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 14.19

CBUAE Classification: Public previous experience in the area of Islamic financing. The 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. 14.20 The 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. 14.21 In 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. 14.22 An Islamic Finance Company must ensure that its corporate governance framework adequately provides for:
14.23 a. Compliance with Sharia'a provisions; الشريعة؛ ألحكام االمتثال .أ
The role of the Sharia'a supervision committee in the governance of the Islamic Finance Company; b. The rights of investment account holders and the processes and controls for protecting their rights; and c.

CBUAE Classification: Public Transparency of financial reporting in respect of investment accounts. d. An 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. 14.24 An 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. 14.25 الإدارة العلیا Management Senior Any nominee for Senior Management must satisfy Fit and Proper requirements defined by the Central Bank. In particular, members of Senior Management must not have:
14.26
Been dismissed from a previous job on the basis of disciplinary action; a. Been convicted in 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. e. Had properties confiscated; or ممتلكاتهم؛ مصادرة تمت .هـ Been placed under court receivership, unless they had been rehabilitated or pardoned by the relevant authorities. f.

CBUAE Classification: Public The nominee for a Senior Management position of a Finance Company must, at a minimum, meet the following professional requirements:
14.27
Be theoretically and practically familiar with the Financing business; a. Have appropriate academic and professional qualifications; and b. Adequate experience in the finance field for not less than ten years. The Central Bank may, at its own discretion, reduce periods of experience. c. The nominee for a Senior Management position of an Islamic Finance Company must, at a minimum, meet the following professional requirements:
14.28
Be theoretically and practically familiar with the Islamic Financing business; a. Have appropriate academic and professional qualification; and b. Adequate experience in the finance field for not less than ten years. The Central Bank may, at its own discretion, reduce periods of experience. c. 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. The 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 14.29

CBUAE Classification: Public responsible for reporting significant transactions, major decisions and activities to the board of directors of the Finance Company. المادة )15( (15) Article Internal policies and procedures الداخلية واإلجراءات السياسات The 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:
15.1 a. Extension of credit; االئتمان؛ منح .أ
Risk management, assessment, handling, monitoring and disclosure thereof; b. ج. تقنية وأمن المعلومات؛ and technology Information security; c. د. التدقيق الداخلي؛ ;audit Internal .d Compliance with relevant laws, regulations and instructions; e. Remuneration and incentives, including remuneration and incentives of Senior Management and remuneration of the board members; and f. g. Outsourcing of business activities. .األعمال أنشطة وتعهيد .ز In 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. 15.2

CBUAE Classification: Public A 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. 15.3 The 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. 15.4 Additional Requirements for internal policies and procedures of an Islamic Finance Company The 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. 15.5 A 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. 15.6 An 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:
15.7
An Islamic Finance Company must prepare procedure manuals for the operations duly approved by their Sharia'a supervision committee as a.

CBUAE Classification: Public 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; 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; b. 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 c. An Islamic Finance Company must undertake an internal Sharia'a review on the operations of the company at least annually. d. Extension of credit الائتمان منح A Finance Company must draw up policies and procedures for Financing, which, at a minimum, must include the following items:
15.8 a. classification of credit worthiness; االئتمانية؛ الجدارة تصنيف .أ
Procedures for dealing with declining credit rating and non-performing loans; b.

CBUAE Classification: Public ج. الضمانات المقبولة وأسس تقدير قيمتها؛ basis the and collaterals Acceptable for assessing its value; c. د. مراقبة، وإدارة وتنفيذ الضمان؛ و and administration ,Monitoring enforcement of collateral; and d. هـ. تكوين مخصصات للمخاطر. .provisioning Risk .e Finance 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. 15.9 Upon 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. 15.10 A 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. 15.11 The 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. 15.12 Credit Exposure risks must be assessed and risk rated prior to making the decision to 15.13

CBUAE Classification: Public extend credit. The risk classification must be reviewed at least once a year. The 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. 15.14 وظیفة إدارة المخاطر function management Risk A 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:
15.15
أ. مخاطر االئتمان؛ ;risks Credit .a ب. مخاطر السوق؛ ;risks Market .b
c. Asset-liability mismatch risks;
d. Liquidity risks; and السيولة؛ مخاطر .د Operational risks, including information technology and security risks. e. The 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 15.16

CBUAE Classification: Public appropriate access to the board of directors of a Finance Company. A Finance Company must set appropriate procedures for the identification, assessment, management and monitoring of risks and prepare risk reports thereon. 15.17 A Finance Company must prepare a quarterly risk report to be discussed by the board of directors after being reviewed by Senior Management. 15.18 المعلومات وأمن تقنیة Information Technology and Security The technical facilities and systems of a Finance Company must be sufficient for the operational needs, business activities and risk exposure of the Finance Company. 15.19 A 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. 15.20 Information 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. 15.21 The Finance Company must use its information technology infrastructure to enhance its ability to retrieve all know-yourcustomer and transactions records in a timely manner. 15.22

CBUAE Classification: Public The 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. 15.23 وظیفـة التدقیق الداخلي function audit Internal The 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. 15.24 The 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. 15.25 The internal audit function must prepare and submit to the board of directors a written report on its activities on a quarterly basis. 15.26 وظیفة الامتثال function Compliance A 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. 15.27 A 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. 15.28 A Finance Company must create the role of a compliance officer, which has a direct reporting line to the board of directors of the 15.29

CBUAE Classification: Public 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. A 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. 15.30 The 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. 15.31 Remuneration and incentives والحوافز المخصصات The 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. 15.32 التعھید Outsourcing A 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 15.33

CBUAE Classification: Public may not provide any other party with access to the confidential data without first obtaining the specific authorization of the Finance Company. A 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. 15.34 Finance 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. 15.35 The 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. 15.36 A 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. 15.37 While 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:
15.38
أ. إشراف اإلدارة العليا؛ ;oversight Management Senior .a ب. إدارة االئتمان واتخاذ قرارات االئتمان؛ ;decisions and management Credit .b ج. إدارة المخاطر؛ ;management Risk .c

CBUAE Classification: Public د. االمتثال؛ ;Compliance .d e. Internal audit; and الداخلي؛ التدقيق .هـ و. وإدارة الوظائف التي تأخذ المخاطر. taking risk the of Management functions. f. Every 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. 15.39 A 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. 15.40 For 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. 15.41 The 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. 15.42 For any outsourced Material Business Activity, the compliance function of the Finance Company must review and report to 15.43

CBUAE Classification: Public 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. An Islamic Finance Company must ensure that its Outsourcing policies and arrangements are consistent with Sharia’a provisions. 15.44 An 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. 15.45 A Finance Company must report to the Central Bank on its Outsourcing arrangements in the format and frequency prescribed by the Central Bank. 15.46 A Finance Company must provide upon request any specific information with respect to Outsourcing arrangements that the Central Bank may require. 15.47 A 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. 15.48
Article (16)
Consumer Protection
The 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 16.1

CBUAE Classification: Public Financing activities outlined in Article 10 of this Regulation. A 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. 16.2 A 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. 16.3 Borrowers 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. 16.4 A Finance Company must use official documents on all transactions when dealing with its customers. 16.5 A Finance Company must follow Central Bank Regulations pertaining to consumer protection. These Regulations are occasionally updated by the Central Bank. 16.6 المادة )17( (17) Article التقارير االئتمانية Reports Credit A Finance Company must strictly adhere to the following credit reporting requirements:
17.1
Provide credit information of borrowers to a Credit Information Agency on at least a monthly basis a.

CBUAE Classification: Public unless otherwise required by the law or the Central Bank; and Request credit information of borrowers from a Credit Information Agency before extending credit to an individual borrower. b. المادة )18( (18) Article Regulatory Reporting and Prior Approval from the Central Bank رفع التقارير إلى المصرف المركزي Bank Central the to Reporting The 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). 18.1 A 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. 18.2 A 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. 18.3 A 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. 18.4

CBUAE Classification: Public A 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. 18.5 A 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. 18.6 Prior approval by the Central Bank المسبقة المركزي المصرف موافقة The licensed Finance Company must strictly adhere to the following:
18.7
Not to make any changes to its name, legal form or capital without prior written approval from the Central Bank; a. Not to merge or consolidate with any other person or entity, without the prior written approval of the Central Bank; b. To conduct its business from independent and appropriate premises; relocation is not allowed without prior approval from the Central Bank; c. 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 d.

CBUAE Classification: Public regulatory requirements where applicable; Issue all correspondence and documentation in the name of the entity and duly signed by authorized persons; e. Make no amendments to its memorandum and articles of association without the approval of the Central Bank; f. Obtain prior approval from the Central Bank for the appointment of Senior Management; g. Obtain prior approval from the Central Bank before commencing any additional activities apart from those specified in Article 10.1 of this Regulation; h. Obtain prior approval from the Central Bank before commencing third party product distribution activities; i. Obtain prior non-objection from the Central Bank before contracting with an Agent; j. Obtain prior approval from the Central Bank before incorporating any subsidiary; and k. Not to incur any encumbrance on any of its assets without prior approval from the Central Bank. l. Any changes in the Finance Company’s shareholdings of 5% or more require prior approval from the Central Bank. 18.8

CBUAE Classification: Public المادة )19( (19) Article التدقيق الخارجي Audit External A 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. 19.1 The 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. 19.2 A 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. 19.3 A Finance Company must not provide financing, facilities or open any accounts for its external auditors. 19.4 A 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. 19.5 The 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:
19.6
If required by the size and nature of its ذلك؛ أعمالها وطبيعة حجم تطلب إذا .أ business; a. If the external auditor commits a violation of a professional nature; b.

CBUAE Classification: Public If there is a reason to believe that the external auditor has a conflict of interest; or c. If the integrity of the finance sector or governance considerations and the protection of stakeholders’ interest so requires. d. المادة )20( (20) Article On-Site Examination الميداني التفتيش The 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. 20.1 The 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. 20.2 Whenever 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. 20.3 For 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. 20.4

CBUAE Classification: Public If 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. 20.5 Should 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. 20.6

CBUAE Classification: Public
PART II – Restricted Licence Finance Companies and Agents
المـادة )21( (21) Article الترخيص Licensing Any 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. 21.1 An applicant for a License under this Regulation shall apply to the Central Bank in the form prescribed by the Central Bank. 21.2 Any applicant for a License under this Regulation must provide all information and documents required to assess the applicant’s suitability for a License. 21.3 The 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). 21.4 The 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. 21.5 As 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. 21.6

CBUAE Classification: Public The 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. 21.7 The Central Bank shall communicate its decision considering the merits of the application and:
21.8
Grant the License with or without conditions and limitations; or a. Reject the application, stating the reasons for rejecting the application. b. A 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. 21.9 A 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. 21.10 A Restricted Licence Finance Company must maintain a physical presence in the UAE. 21.11 The legal form of a Restricted Licence Finance Company must be in one of the forms stipulated in the Commercial Companies Law. 21.12 The 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 21.13

CBUAE Classification: Public any activity other than the provision of ShortTerm Credit in accordance with this Regulation. A 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. 21.14 A 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. 21.15 A 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. 21.16 As 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. 21.17 As 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. 21.18 The Central Bank may take any action deemed appropriate to ensure the sound functioning of Licensees and/or the financial sector. 21.19 The 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. 21.20

CBUAE Classification: Public المــادة )22( (22) Article قيــود الترخيص Restrictions License A Restricted Licence Finance Company may only carry on the provisions of Short-Term Credit within the criteria set in Article (24) of this Regulation. 22.1 A Restricted Licence Finance Company’s activities must be funded exclusively through shareholder’s equity, retained earnings and/or debt instruments. 22.2 A Restricted Licence Finance Company is prohibited from accessing funds through Crowdfunding to finance its activities licensed under this Regulation. 22.3 A Restricted Licence Finance Company is prohibited from accepting deposits of any type. 22.4 المـادة )23( (23) Article ّ Permitted Activities المصـــ The 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). 23.1 The 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. 23.2

CBUAE Classification: Public Restricted Licence Finance Companies or Agents must not charge interest on ShortTerm Credit. 23.3 The 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. 23.4 The 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. 23.5 Restricted 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. 23.6 Borrowers’ 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 23.7

CBUAE Classification: Public must be in alignment with Article (121 bis) of the Central Bank Law. المـادة )24( (24) Article التقارير االئتمـــانية Reports Credit Restricted Licence Finance Companies and Agents must strictly adhere to the following credit reporting requirements:
24.1
Provide credit information of Borrowers to the Credit Information Agency, based on the terms and conditions of the Credit Information Agency; and a. 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. b. The 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. 24.2 Access 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. 24.3 Restricted Licence Finance Companies and Agents must disclose to Borrowers that credit information will be retrieved from (where applicable) and shared with the Credit 24.4

CBUAE Classification: Public Information Agency; and explain the implications of borrowing, late payment and default, on the Borrower’s Credit Report. A 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. 24.5 A 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. 24.6 A 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. 24.7 المــادة )25( (25) Article متطلبات االحد األدنى لرأس المال Requirements Capital Minimum A Restricted Licence Finance Company must maintain a minimum level of capital on an ongoing basis. 25.1 A Restricted Licence Finance Company must hold and maintain the higher of:
25.2

CBUAE Classification: Public Aggregate Capital Funds of Twenty million Dirham (AED 20,000,000); or a. Aggregate Capital Funds equivalent to 5 per cent of the outstanding lending volume. b. Aggregate Capital Funds consist of the following items:
25.3
أ. رأس المال المدفوع؛ ;capital up-Paid .a Reserves, excluding revaluation reserve; and b. ج. واألرباح المحتجــزة. .earnings Retained .c The following items must be deducted from Aggregate Capital Funds:
25.4 a. Accumulated losses; and المتراكمة؛ الخسائر .أ
ب. والشهــرة .Goodwill .b A Restricted Licence Finance Company must obtain prior approval from the Central Bank for any changes to its capital. 25.5 The 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. 25.6 المــادة )26( (26) Article الحوكمــــة Governance Restricted Licence Finance Companies and Agents must develop principles and policies for corporate governance; put in place an approved organisational and governance 26.1

CBUAE Classification: Public structure; and implement a Fit and Proper framework. A 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). 26.2 . Restricted 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. 26.3 Restricted Licence Finance Companies must obtain prior approval from the Central Bank prior to the appointment of any Authorized Individuals. 26.4 All 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. 26.5 Restricted Licence Finance Companies must obtain approval from the Central Bank prior to any membership changes in its board of directors. 26.6 Restricted 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. 26.7

CBUAE Classification: Public المــادة )27( (27) Article Risk Management and Internal Controls الداخلية والضوابط المخاطر إدارة Restricted 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. 27.1 Restricted 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 27.2 Restricted 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. 27.3 Restricted 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. 27.4 Restricted Licence Finance Companies and Agents must institute adequate internal controls and management procedures in relation to cyber and fraud related risks. 27.5 Restricted Licence Finance Companies and Agents must have adequate resources to undertake proper underwriting of credits and 27.6

CBUAE Classification: Public

compreshensive credit risk assessments of Borrowers prior to approving a Short-Term Credit. المــادة )28( (28) Article Compliance with Laws and Central Bank المركزي المصرف وأنظمة للقوانين االمتثال Regulations Restricted 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. 28.1 The 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. 28.2 Restricted 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. 28.3 Restricted 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 28.4

CBUAE Classification: Public 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. Restricted 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. 28.5 المــادة )29( (29) Article Transparency and Disclosures واإلفصاح الشفافية Restricted 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. 29.1 Restricted Licence Finance Companies and Agents must structure their activities in a clear, transparent format using plain language. 29.2 Advertising 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. 29.3 To 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 29.4

CBUAE Classification: Public 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. Restricted 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. 29.5 Restricted Licence Finance Companies and Agents must disclose to Borrowers, the total Fees payable by the Borrower for the ShortTerm 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. 29.6 Restricted 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. 29.7 The 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. 29.8 Restricted Licence Finance Companies and Agents must clearly disclose the available provisions for hardship assistance to Borrowers who experience financial difficulties, including suitable debt 29.9

CBUAE Classification: Public management solutions and the related policy on forbearance. Restricted 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. 29.10 المــادة )30( (30) Article Dispute and Complaints Management والشكــاوى النزاعات إدارة Restricted 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. 30.1 المــادة )31( (31) Article رفع التقارير وحفظ السجالت Keeping Record and Reporting A 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. 31.1 Restricted Licence Finance Companies shall report the following to the Central Bank, at intervals stipulated by the Central Bank:
31.2

CBUAE Classification: Public a. Financial position; b. Description of its products and services;
c. Description of its Fee structure;
عمالئها؛ لقاعدة وصف .د d. Description of its customer base; Details of its credit portfolio, including e. size and demographic allocation; ;defaults and arrears in Portfolio .f و. محفظة المتأخرات والتخلف عن السداد؛ Description of complaints received and g. resolution status of these complaints; All fraud related activity including internal, external and attempted cases of h. fraud; Details of vulnerabilities identified in
i. the online systems and security;
ي. تفاصيل العقود/ترتيبات التعهيد؛ Outsourcing/contracts of Details j. arrangements ; and Any other information requested by the k. Central Bank. A Restricted Licence Finance Company must immediately notify the Central Bank of any changes in its ownership and/or senior management. 31.3 Restricted 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. 31.4 Restricted 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. 31.5

CBUAE Classification: Public Restricted 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. 31.6 All 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. 31.7 The records maintained by Restricted Licence Finance Companies and Agents must include:
31.8
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; a. Internal policies, procedures and operating documents; b. Corporate and financial records and general ledger and sub-ledgers; c. Reports and statements issued to Borrowers and regulators; d. Any contracts, agreements, Credit Reports, communications and other documents related to Borrowers; e. Records demonstrating that the Restricted Licence Finance Company or Agent has control mechanisms in place to address complaints and grievances; f. Records of Borrowers’ complaints and resolution status; g.

CBUAE Classification: Public ح. معلومات، وحسابات واتصاالت اإلدارة؛ accounts ,information Management and communications; h. ط. سجالت الموارد البشرية؛ ;records resource Human .i Information technology architecture and security related documents; and j Any other records stipulated by the Central Bank. k المــادة )32( (32) Article Supervision and Examination والتفتيش االشــــراف The 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. 32.1

CBUAE Classification: Public
PART III – Finance Companies and Restricted Licence Finance Companies
المــادة )33( (33) Article Enforcement and Sanctions والعقوبــات االنفـــاذ Violation 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. 33.1 Supervisory 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. 33.2 المــادة )34( (34) Article Interpretation of Regulation النظـام تفسير The Regulatory Development Department of the Central Bank shall be the reference for interpretation of the provisions of this Regulation. 34.1 المــادة )35( (35) Article Publication and Application والتطــــــبيق النشــــــر This Regulation shall be published in the Official Gazette in both Arabic and English and shall come into effect on the day of its publication. 35.1

CBUAE Classification: Public From 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. 35.2 المــادة )36( (36) Article ترتيبات انتقاليــة Arrangements Transition The 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. 36.1 المــادة )37( (37) Article Cancellation of Previous Regulation السابق النظام إلغاء This Regulation repeals and replaces the following Central Bank Regulation:
37.1 a. The Finance Companies Regulation
issued via Circular No. 112/2018, dated 24/04/2018. Khaled Mohamed Balama Governor of the Central Bank of the UAE