Remuneration Regulation for Banks and Insurance Companies

1 CBUAE Classification: Public Remuneration Regulation for Banks and Insurance Companies

2 CBUAE Classification: Public CONTENTS Page Subject مقدمـــة 4 Introduction الهــدف 6 Objective Scope of Application 6 التطبيق نطاق تعريفات 7 Definitions) 1 (Article المادة )1( المادة )2( إطار المكافآت 14 Framework Remuneration) 2 (Article المادة )3( سياسة المكافآت 16 Policy Remuneration) 3 (Article Article (4) Responsibilities of the Board 23 اإلدارة مجلس مسؤوليات( 4 )المادة Remuneration The المادة )5( لجنة المكافآت 26 Committee Article (5) Risk the of Responsibilities المادة )6( مسؤوليات لجنة المخاطر 29 Committee Article (6) Senior of Responsibilities المادة )7( مسؤوليات اإلدارة العليا 31 Management Article (7) الضبط وظائف 32 Remuneration of Staff in Control Functions Article (8) Material of Remuneration المادة )9( مكافآت أخذي المخاطر الجوهرية 33 Risk Takers Article (9) الداخلية Article (10) Remuneration of the ISSC 35 المادة )11( المكافآت المتغيرة 37 Remuneration Variable) 11 (Article األسهم 41 Share-based Components of Remuneration Article (12) المادة )13( مدفوعات الحوافز 43 Payments Bonus) 13 (Article المادة )14( مدفوعات الفصل من العمل 44 Payments Severance) 14 (Article Article (15) Reporting and Disclosures 45 واإلفصاح اإلبالغ( 15 )المادة

3 CBUAE Classification: Public Article (16) Enforcement and Sanctions 49 والجزاءات اإلنفاذ( 16 )المادة Article (17) Interpretation of Regulation 49 النظام تفسير( 17 )المادة Article (18) Publication and Application 49 والتطبيق النشر( 18 )المادة

4 CBUAE Classification: Public تعميم رقم: /5 2026 5/2026 : .No Circular التاريخ: /13 2026/03 13/03/2026 : Date Insurance and Banks All : الى: جميع البنوك وشركات التأمين Companies To : Remuneration Regulation for Banks and Insurance Companies Subject مقدمـــة INTRODUCTION The Central Bank is seeking to establish a framework for the implementation of sound remuneration practices across Banks and Insurance Companies, herein referred to as “Financial Institutions”. The Remuneration Regulation for Banks and Insurance Companies (this Regulation), sets out the Central Bank’s minimum requirements for Financial Institutions to maintain responsible and effective remuneration frameworks to ensure that remuneration is commensurate with performance and risk outcomes, and to address the risks associated with improper remuneration practices. This Regulation must be read in conjunction with the Central Bank Law, and the Regulations issued in implementation thereof, including the following, at a minimum:

• Central Bank Circular No. 153/2018 – Risk Management Regulation and Standards;
• Central Bank Circular No. 83/2019 – Corporate Governance Regulation for Banks and accompanying Standards;
• Central Bank Circular No. 4444/2021 – Consumer Protection Regulation and Standards;
• Central Bank Circular No. 24/2022 - Corporate Governance Regulation for Insurance Companies and accompanying Standards;

5 CBUAE Classification: Public

• Central Bank Circular No. 25/2022 – Risk Management and Internal Controls Regulation and Standards for Insurance Companies;
• Central Bank Circular No. 4/2024 – Fitness and Propriety Regulation and Standards;
• Notice No. CBUAE/BSD/N/2020/2123 - Standard Re Shari’ah Governance for Islamic Financial Institutions; and
• Notice No. CBUAE/BIS/2023/4496 - Standard Re Shari’ah Governance for Takaful Insurance Companies.
• إشل ص مص/2020/2123N/BSD/CBUAE– ص
• إشععععلعع ص عمصص/2023/4496BIS/CBUAEصص–ص Financial Institutions must also refer to Federal Decree-Law No. (32) of 2021 on Commercial Companies and its amendments, in respect of remuneration of the Board. The requirements herein are in addition to the requirements on compensation set in the Central Bank’s corporate governance framework. In the event of any conflicts between requirements in this Regulation and any other Regulations, the requirements herein take precedence. The Central Bank will use this Regulation as the minimum standard in its assessment of Financial Institutions’ remuneration frameworks including systems, policies, procedures and practices, to ensure the sound and prudent management and promotion of effective risk management within Financial Institutions. This Regulation is issued pursuant to the powers vested in the Central Bank under the Central Bank Law and sets the principles for sound remuneration practices.

6 CBUAE Classification: Public Where this Regulation includes a requirement to provide information or to take certain measures, or to address certain items, the Central Bank may impose requirements, which are additional to those provided for in the relevant Article. الهدف OBJECTIVE The objective of this Regulation is to establish the minimum requirements for ensuring that Financial Institutions establish remuneration frameworks which incentivise prudent management of risks and provide for consequences for poor risk outcomes. The Regulation seeks to promote responsible and risk sensitive remuneration systems in Financial Institutions. The implementation of this Regulation is expected to contribute to the safety, soundness and solvency of Financial Institutions and overall stability of the UAE financial sector. This Regulation does not seek to prescribe the amounts set for remuneration of any Person, including Relevant Persons. Financial Institutions are expected to manage their remuneration practices in alignment with inter alia, their long￾term strategic objectives and risk appetite. With the implementation of this Regulation, the expectation is that Financial Institutions must be able to assure the Central Bank, on a continuous basis, that they are in full compliance with the minimum requirements established herein. SCOPE OF APPLICATION التطبيق نطاق This Regulation applies to all Banks and Insurance Companies. Where the term ‘Insurance Company’ is used in this Regulation, it refers to an Insurance Company and/or a Reinsurance Company.

7 CBUAE Classification: Public The remuneration framework implemented must consider the size, scale, risk profile, internal organisation, nature of operations and complexity of the Financial Institution’s business. The Central Bank will apply the principle of proportionality in this regard. Financial Institutions designated as systemically important may be subject to enhanced requirements, as determined by the Central Bank. Financial Institutions which are part of a Group may meet the requirements set herein via Group level arrangements and apply a Group remuneration policy provided that the Group policy is Board approved and the policy and arrangements meet the requirements established in this Regulation, giving appropriate consideration to the Financial Institution’s specific activities and structure. The requirements within this Regulation shall also apply to Staff engaged by a Financial Institution in cases where the role held is Outsourced. المادة )1( – تعريفات Definitions :)1 (Article The following terms shall have the meaning assigned to them below for the purposes of this Regulation: 1.1 Affiliate: an entity that, directly or indirectly, controls, 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. 1-1

8 CBUAE Classification: Public 1.2 Authorized Individual: any natural Person authorized in accordance with the provisions of the Central Bank Law, to carry on any of the Designated Functions. 2-1 1.3 Bank: any juridical person licensed in accordance with the provisions of the Central Bank Law and the regulations issued in implementation thereof, to primarily carry on the activity of taking deposits in addition to any of the Licensed Financial Activities. 3-1 1.4 Board: the board of directors of the Financial Institution. In the case of branches of foreign Financial Institutions, Board refers to the highest decision making body of the Financial Institution within the State, for example, the Senior Management committee. 4-1 1.5 Central Bank: the Central Bank of the United Arab Emirates. 5-1 1.6 Central Bank Law: the Federal Decree￾Law No. (6) of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business. 6-1 1.7 Chief Executive Officer: the most senior executive appointed by the Board. 7-1 1.8 Clawback: a mechanism which allows the Financial Institution, under specified conditions, to recover from a member of Staff, previously earned variable remuneration which has been paid or has already vested. (Where vesting refers to the 8-1

9 CBUAE Classification: Public effect by which the Person becomes the legal owner of the variable remuneration awarded). 1.9 Conflict of Interest: a situation of actual or perceived conflict between the duty and private interests of a Person, which could improperly influence the performance of his/her duties and responsibilities. 9-1 1.10 Control Functions: the Financial Institution’s functions that have a responsibility independent from management to provide objective assessment, reporting and/or assurance; this includes the risk management function, the compliance function and the internal audit function. 10-1 1.11 Designated Functions: functions of the Authorized Individual at, or for the benefit of, a Financial Institution of influential nature on the institution's activities. 11-1 1.12 Financial Institution: a Bank or an Insurance Company, which is subject to the provisions of this Regulation. 12-1 1.13 Group: a group of entities that includes an entity (the ‘first entity’) and: a. any Parent of the first entity; b. any Subsidiary of the first entity or of any Parent of the first entity; and c. any Affiliate. 13-1

10 CBUAE Classification: Public 1.14 Insurance Company (Insurer): any juridical person, licensed in accordance with the provisions of the Central Bank Law and the regulations issued in implementation thereof to carry on insurance business and activities in the State. 14-1 1.15 Internal Shari’ah Supervision Committee (ISSC): a committee formed by the Islamic Financial Institution, comprising of scholars specialized in Islamic financial transactions, which independently supervises transactions, activities, and products that are offered and managed by the Islamic Financial Institution, and ensure its compliance with Islamic Shari’ah provisions in all its objectives, activities, operations, and code of conduct. 15-1 1.16 Islamic Financial Institutions: Banks, Takaful Insurance Companies, and Other Financial Institutions licensed in accordance with the provisions of the Central Bank Law and the regulations issued in implementation thereof, to carry on the whole or a part of their activities and business in accordance with the rules and principles of the Islamic Shari`ah. 16-1 1.17 Licensed Financial Activities: the financial activities subject to Central Bank licensing and supervision, which are specified in Article (61) of the Central Bank Law and the regulations issued in implementation thereof. 17-1

11 CBUAE Classification: Public 1.18 Malus: a mechanism which permits the Financial Institution to reduce the value of all or part of deferred, unvested variable remuneration under specific conditions. 18-1 1.19 Material Risk Takers: Staff whose work is deemed to have a significant impact on the overall risk profile of the Financial Institution or the Group and includes at a minimum, any Person who holds a Designated Function or who is a Senior Material Risk Taker, but excludes Staff in Control Functions. 19-1 1.20 Other Financial Institutions: any Person, except Banks and (Re)Insurance Companies, licensed in accordance with the provisions of the Central Bank Law and the regulations issued in implementation thereof, to carry on a Licensed Financial Activity or more. 20-1 1.21 Outsourcing an agreement between a Financial Institution and a Third-Party Service Provider whereby that Third-Party Service Provider performs a process, service or activity that would otherwise be undertaken by the Financial Institution itself. 21-1 1.22 Parent: an entity (the ‘first entity’) which: a. holds a majority of the voting rights in another entity (the ‘second entity’); b. is a shareholder of the second entity and has the right to appoint or remove a majority of the board of 22-1

12 CBUAE Classification: Public directors or managers of the second entity; or c. is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity. Or; d. if the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity. 1.23 Person: a natural Person. . بيل صرفشامصرف:الشخص 23-1 1.24 Regulations: any resolution, regulation, circular, rule, standard or notice issued by the Central Bank or resolution issued by the Higher Shari’ah Authority. 24-1 1.25 Reinsurance Company: any juridical person licensed in accordance with the provisions of the Central Bank Law and the regulations issued in implementation thereof to carry on reinsurance business and activities. 25-1 1.26 Relevant Person: a Person who is a Material Risk Taker or Staff in a Control Function. 26-1 1.27 Senior Management: the executive management of the Financial Institution responsible and accountable to the Board for the sound and prudent day-to-day management of the Financial Institution, 27-1

13 CBUAE Classification: Public generally including, but not limited to, the Chief Executive Officer, chief financial officer, chief risk officer, heads of the compliance and internal audit functions. 1.28 Senior Material Risk Takers: include, but are not limited to, Staff who are members of Senior Management and/or members of the executive committee of the Financial Institution. Senior Material Risk Taker excludes Staff in Control Functions. 28-1 1.29 Staff: all the Persons working for a Financial Institution, including Senior Management, except for the members of its Board. 29-1 1.30 State: the United Arab Emirates (UAE). . حد صرفلزـيعصرف ر رإلم :الدولة 30-1 1.31 Subsidiary: an entity (the ‘first entity’) is a subsidiary of another entity (the ‘second entity’) if the second entity: a. holds a majority of the voting rights in the first entity; b. 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 c. 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. 31-1

14 CBUAE Classification: Public Or; d. if the first entity is a subsidiary of another entity which is itself a subsidiary of the second entity. 1.32 Takaful Insurance Company: an Insurance Company that carries on insurance business and activities in accordance with the rules and principles of Islamic Shari`ah, and the Central Bank Law and the regulations issued in implementation thereof. 32-1 1.33 Third-Party Service Provider: a Person or juridical person that performs services, activities, functions, processes or tasks directly for a Financial Institution, including in the form of Outsourcing but excluding employment as Staff of the Financial Institution. 33-1 المادة )2(: إطار المكافآت Framework Remuneration :)2 (Article 2.1 A Financial Institution must have a Board￾approved remuneration framework that promotes long-term value creation through alignment of remuneration with the strategic objectives, sound corporate governance and the approved risk management framework. 1-2 2.2 The remuneration framework must support both individual and corporate performance, encourage the sustainable long-term financial health of the business and include appropriate incentives aligned with prudent risk-taking. 2-2

15 CBUAE Classification: Public 2.3 The remuneration framework must be in alignment with applicable legislation, Regulations, the Financial Institution’s business plan, objectives, and risk management framework and explicitly address the mitigation of conduct risk in line with regulatory requirements. 3-2 2.4 Financial Institutions must review the performance and effectiveness of the remuneration framework and the compliance of the framework against the requirements of this Regulation and any other applicable Regulations, regularly, and at a minimum annually. . 4-2 2.5 The suitability, appropriateness and effectiveness of the remuneration framework must be subject to a comprehensive, independent review, at least every three years. The review must include qualitative and quantitative analyses and must consider inter alia, the alignment of the framework with the Central Bank Law and Regulations, alongside its alignment with the Financial Institution’s risk management framework and risk appetite; the effectiveness of the governance framework and controls around remuneration; and analyses of appropriate metrics including risk and performance adjustments. A summary of the review’s findings must be submitted to the Central Bank within three (3) months of its completion. The Central Bank, in its sole discretion, may require more frequent reviews. . 5-2 2.6 Financial Institutions must ensure that the remuneration framework, including the 6-2

16 CBUAE Classification: Public structure of remuneration, promotes effective management of financial and non-financial risks and the Financial Institution’s sustainability, performance, safety and soundness. 2.7 Financial Institutions must develop, implement, monitor and regularly review an approved remuneration policy and related systems, practices and procedures, which promote sound and effective risk management and incentivise prudent risk￾taking within the approved risk appetite of the Financial Institution. 7-2 المادة )3(: سياسة المكافآت Policy Remuneration :)3 (Article 3.1 The remuneration policy must be approved by the Board and must seek to deliver remuneration levels which are clearly linked to the performance of the Financial Institution alongside its alignment with the strategic objectives, long-term performance and risk-adjusted outcomes. 1-3 3.2 The Financial Institution must implement a remuneration policy which does not encourage Staff to take inappropriate or excessive risks, particularly where performance based variable remuneration is utilised. 2-3 3.3 The remuneration policy must address the use and balance of fixed and variable remuneration components for specific roles and/or categories of Staff. Financial Institutions must consider all relevant factors to ascertain the most appropriate balance of fixed and variable remuneration 3-3

17 CBUAE Classification: Public for different categories/groups of Staff and/or for a particular role, including inter alia: 3.3.1 the Financial Institution’s business activities and associated prudential and conduct risks; and 1-3-3 3.3.2 the role of the Person in the Financial Institution and/or the impact that different categories of Staff have on the risk profile of the Financial Institution. 2-3-3 3.4 Fixed remuneration must primarily be based on the Person’s professional experience and role and responsibilities as set out in the job description, contract and/or other terms of employment/engagement; and must be pre￾determined, stable, non-discretionary and non-revocable. Variable remuneration must usually be performance based, reflecting the long-term performance of the Person. 4-3 3.5 The Financial Institution’s remuneration policy must have a broad scope, which, at a minimum, covers Relevant Persons and all other categories of Staff. 5-3 3.6 The Financial Institution’s remuneration policy must set the criteria for the identification of Material Risk Takers and Senior Material Risk Takers, which must take into account the overall potential impact of the role on the risk profile of the Financial Institution and the role and 6-3

18 CBUAE Classification: Public responsibilities of the Person, as equivalent positions may be titled differently within individual Financial Institutions. The list of Material Risk Takers, including Senior Material Risk Takers must be reviewed by the relevant Control Functions and approved by the Board on recommendation of the remuneration committee, on an annual basis. Once a Person has been identified as a Material Risk Taker, their designation as such can only be considered for removal if there has been a significant change in their role and/or responsibilities. The list of Material Risk Takers must be under regular review, and at least annually and Persons identified as Material Risk Takers must be formally notified. 3.7 Any Person who carries on activities which enable them to expose the Financial Institution to a material level of risk and/or materially affect the risk profile of the Financial Institution must be designated as a Material Risk Taker. This includes, but is not limited to: 7-3 3.7.1 Persons with the ability to take, approve, or veto material credit proposals, insurance underwriting, reinsurance arrangements, or trading book transactions; 1-7-3 3.7.2 Persons with the ability to accept large and/or non-standard risks outside of the delegated authority threshold; and 2-7-3

19 CBUAE Classification: Public 3.7.3 Persons who make decisions regarding investments in illiquid or volatile assets or who make investments which impact the risk-return balance of the investment portfolio. 3-7-3 3.8 Where a member of Staff’s total remuneration places them within the top 5% of highest earners within the Financial Institution, but the Person is not captured as a Senior Material Risk Taker by the qualitative criteria, Financial Institutions must consider the impact of the Person on the risk profile of the Financial Institution and make a reasoned assessment about whether the Person should be designated as a Senior Material Risk Taker. In this context, earnings refers to total remuneration, that is, fixed and variable components including bonuses. 8-3 3.9 The Financial Institution’s remuneration policy must cover the following, at a minimum: 9-3 3.9.1 Clear objective which is aligned with the strategy and risk management framework; 1-9-3 3.9.2 The performance criteria, related assessment criteria and the application and methodology for determining remuneration for all categories of Staff, appropriately aligned with the performance and risk management objectives; 2-9-3

20 CBUAE Classification: Public 3.9.3 The structure of the remuneration system, including the types of remuneration and the structure, frequency and approval process of remuneration for Relevant Persons; 3-9-3 3.9.4 Approval structure for remuneration, including limits and escalation requirements; 4-9-3 3.9.5 Clear accountabilities for outcomes and appropriate consequences for poor outcomes; 5-9-3 3.9.6 Remuneration requirements for various categories of Staff; 6-9-3 3.9.7 Performance standards which are consistent with the long-term sustainability and financial soundness of the Financial Institution; 7-9-3 3.9.8 Identification of remuneration awards which may be subject to reduction or forfeiture through Malus, Clawback or other arrangements, the related time periods and the criteria for use of these arrangements; 8-9-3 3.9.9 Description of the responsibilities of the Control Functions, as well as human 9-9-3

21 CBUAE Classification: Public resources, in the remuneration process and particularly in relation to participating in the development of remuneration policies and performance indicators to support the implementation and monitoring of the remuneration framework; and their role in providing inputs into the structure and determination of remuneration; 3.9.10 Mechanisms for identifying, monitoring and reporting on Staff misconduct; 10-9-3 3.9.11 Requirements for the appropriate maintenance of adequate records documenting all remuneration awards made, including to both current and former Staff; and 11-9-3 3.9.12 Reporting and disclosure requirements, governance processes, including for review and approval and ensuring alignment with applicable legal and regulatory requirements, related timelines and accountabilities. 12-9-3 3.10 The policy must also address contracts of Staff and indicate the following, at a minimum, in relation to these contracts: 10-3 3.10.1 Variable remuneration is conditional, discretionary and 1-10-3

22 CBUAE Classification: Public contingent upon sustainable and risk-adjusted performance and is therefore subject to forfeiture or reduction at the Financial Institution’s discretion; 3.10.2 Variable remuneration, including a deferred portion, is paid or vests only if it is sustainable according to the financial position of the Financial Institution as a whole and justified on the basis of the performance of the Financial Institution, the business unit and the Person; 2-10-3 3.10.3 Variable remuneration is subject to Clawbacks and Malus in specific circumstances set by the Financial Institution, including, but not limited to: 3-10-3 أ. س ءصسم كصرف ظفين؛ ;misconduct Staff) a بص. آشلصل رـ صرف ا ز؛ ;controls risk of Failure) b ج. رالح ي ؛ ;Fraud) c ص.ص رإلذ صرفةسيم؛ ;negligence Gross) d e) Regulatory fines or penalties due to individual misconduct; f) Failure in governance of risk oversight; g) Negative financial performance/results which can be attributed to excessive risk taking of the Relevant Person concerned; and

23 CBUAE Classification: Public h) Where the risks attributed to the Relevant Person’s performance have manifested after the award of the variable remuneration. 3.11 The Financial Institutions’ remuneration policy must also cover bonus and severance payments, including the maximum amount and criteria for the determination of such payments to Staff, aligned with applicable legal and regulatory requirements. 11-3 Article (4): Responsibilities of the Board اإلدارة مجلس مسؤوليات :(4 )المادة 4.1 The Board has ultimate responsibility for approving the Financial Institution’s remuneration framework, including the remuneration policy and a standalone remuneration policy for the ISSC; and overseeing their effective implementation. The Board must implement a process for the monitoring and reviewing of the remuneration policies and ensuring that effective controls of the policies are established. 1-4 4.2 The Board must ensure that the remuneration framework, including the remuneration policy and practices is in full compliance with the Central Bank Law and Regulations; and is properly aligned with the Financial Institution’s strategic objectives, risk appetite and the long-term interests of the Financial Institution, its 2-4

24 CBUAE Classification: Public depositors and/or policyholders and the public interest. 4.3 The Board is responsible for the overall design and oversight of the remuneration framework, with a view to promoting prudent risk-taking behaviours and practices and ensuring a design that addresses misconduct risk and imprudent risk-taking behaviour. 3-4 4.4 The Board must oversee and hold Senior Management accountable for effectively participating in and implementing the design of the remuneration framework, in addition to providing effective challenge to Senior Management’s remuneration recommendations, proposals and assessments. 4-4 4.5 The Board must ensure that the Financial Institution’s remuneration framework is appropriately supported through the effective implementation of a comprehensive risk management framework including accountabilities and strong risk culture and clear documentation of appropriate consequences for poor performance and risk outcomes and the links to remuneration. 5-4 4.6 The Board must approve the remuneration of Material Risk Takers and Staff in Control Functions, individually and as a cohort; and oversee the development and operation of compensation policies, systems and related control processes. 6-4

25 CBUAE Classification: Public 4.7 The Board must review and provide final approval for the remuneration amount and distribution of total variable remuneration on recommendation of the remuneration committee. 7-4 4.8 The Board must ensure that Staff in Control Functions are appropriately involved in the development of the remuneration policy. Staff in Control Functions must also participate in the effective monitoring of the implementation of the remuneration policy to ensure that remuneration practices do not create incentives for excessive or inappropriate risk taking, are carried out in alignment with the remuneration policy and promote the effective alignment of risks and rewards. 8-4 4.9 The Board must ensure that the remuneration policy includes measures to avoid Conflicts of Interest, including potential Conflicts of Interest for the ISSC in issuing Shariah resolutions. The policy must adequately cover the identification, management and mitigation of Conflicts of Interests, and that members of the Board must not be placed in positions of actual or perceived Conflicts of Interests in respect of decisions on remuneration. 9-4 4.10 The Board must ensure that an annual remuneration review is undertaken, independent of management and submitted to the Central Bank. The review must assess, inter alia, compliance with the Central Bank Law and applicable Regulations including this Regulation; and 10-4

26 CBUAE Classification: Public the Financial Institution’s remuneration and other policies and procedures. 4.11 The Board must establish a committee responsible for remuneration. The composition, governance and functions of the committee must be in compliance with the requirements set by the Central Bank in applicable Regulations. 11-4 Article (5): The Remuneration Committee المكافآت لجنة :(5 )المادة 5.1 The mandate, composition and terms of reference of the remuneration committee must be documented and well defined including inter alia, the specific responsibilities, authority and the decision￾making procedures. 1-5 5.2 The remuneration committee, must have an adequate representation of independent, non-executive members to promote objectivity in decision-making. 2-5 5.3 The remuneration committee must have the knowledge and experience to manage the remuneration setting process, including in the area of corporate governance, and support the Board in overseeing the design of the remuneration framework, including the policy, and remuneration practices and their implementation and operation. The specific responsibilities must include, at a minimum: 3-5 5.3.1 reviewing and monitoring the level, structure and conditions of the Senior Management’s 1-3-5

27 CBUAE Classification: Public remuneration and terms of employment/engagement; 5.3.2 reviewing how identification of Material Risk Takers and Senior Material Risk Takers is conducted; 2-3-5 5.3.3 recommending, reviewing and monitoring the remuneration of Staff in Control Functions to ensure that their independence and objectivity is not compromised by the remuneration policies or practices of the Financial Institution; and 3-3-5 5.3.4 setting detailed remuneration and termination payments and conditions for Relevant Persons. 4-3-5 5.4 The remuneration committee must have the requisite competencies to make informed and independent judgements on the suitability and effectiveness of the Financial Institution’s remuneration framework, including the remuneration system, policies, procedures and practices; and remuneration of Relevant Persons, and the impact on risk, capital and liquidity management. 4-5 5.5 The remuneration committee must adopt and oversee the effective implementation of a written remuneration policy for the Financial Institution, which does not incentivise excessive or inappropriate risk taking, is in line with the corporate culture, 5-5

28 CBUAE Classification: Public objectives, strategies, good conduct outcomes, identified risk appetite, and long-term interests of the Financial Institution and has proper regard to the interests of inter alia its depositors and/or policyholders and the public interest. The committee must review the policy periodically in line with regulatory requirements. 5.6 The remuneration committee must establish sound remuneration practices which promote the alignment of remuneration policies with the long-term interests of the Financial Institution, establish mechanisms to measure performance against risk outcomes and avoid excessive risk taking. 6-5 5.7 The remuneration committee must set appropriate performance and remuneration standards for categories of Relevant Persons and other Staff, consistent with the long-term strategy, sustainability and financial soundness of the Financial Institution, and monitor whether Relevant Persons are meeting the performance objectives set by the Board. 7-5 5.8 The remuneration committee must engage with other board committees, including the Board’s risk and compliance committee and the audit committee, as appropriate, to improve risk management, particularly through evaluations of the remuneration framework and its alignment with incentives and risk; and advising the Board on the incentives created by the remuneration practices and their effects on risk-taking behaviour. 8-5

29 CBUAE Classification: Public 5.9 The remuneration committee must set the information and reporting requirements from various committees and departments, including type and regularity of reporting. 9-5 5.10 The remuneration committee must regularly engage with Senior Management, including undertaking a review of remuneration policies, assessing their implementation, monitoring the achievement of objectives and where required, challenging Senior Management’s remuneration assessments and recommendations. 10-5 5.11 The remuneration committee must regularly review the remuneration of Relevant Persons to ensure compliance with applicable law, this Regulation and other applicable Regulations and the Financial Institution’s remuneration policy, and apply corrective action, as required. 11-5 5.12 The remuneration committee must have access to information and analyses from Staff in Control Functions and engage appropriate Staff in its deliberations. 12-5 Article (6): Responsibilities of the Risk Committee 6.1 The Board’s risk committee must play a key role in the Financial Institution’s remuneration framework through, at a minimum: 1-6

30 CBUAE Classification: Public 6.1.1 Participating in the setting of targets and monitoring of remuneration to ensure that risk is adequately considered and incentives are aligned with the Financial Institution’s risk appetite and tolerance, including through providing documented guidance on the risk weightings to be applied to performance objectives of Relevant Persons; 1-1-6 6.1.2 Reviewing the remuneration policy and its implementation; 2-1-6 6.1.3 Providing inputs on proposed variable remuneration, ensuring alignment with the risk appetite and tolerance; 3-1-6 6.1.4 Evaluating the risk performance of business units and presenting a report on this assessment to the remuneration committee; and

4-1-6 6.1.5 Assessing the remuneration arrangements, including fixed and variable remuneration of all Outsourced roles to ensure, inter alia, that sound remuneration practices are not compromised. 5-1-6 6.2 To support its role in the remuneration process, the Financial Institution’s risk committee must consider inputs and advice from the relevant Control Functions. 2-6

31 CBUAE Classification: Public Article (7): Responsibilities of Senior Management 7.1 Senior Management must implement the approved remuneration framework that promotes effective governance, sound remuneration practices, ethical behaviour and comply with laws, regulations and internal conduct standards. 1-7 7.2 Senior Management must adopt and regularly review the general principles of the remuneration policy. 2-7 7.3 Senior Management must develop and communicate conduct expectations and clearly link them with remuneration, including as part of the performance assessment process. 3-7 7.4 Senior Management must identify, monitor and report on relevant indicators of misconduct risk; and establish and monitor the role of departments in escalating and remediating identified deficiencies or other important matters in an appropriate and timely fashion, in such a way as to allow inclusion of relevant feedback and changes in the performance assessment process if needed. 4-7 7.5 Senior Management must regularly report to the remuneration committee, at least annually, on inter alia, actions taken or proposed to be taken to ensure compliance with this Regulation. 5-7

32 CBUAE Classification: Public Article (8): Remuneration of Staff in Control Functions 8.1 Financial Institutions must ensure that the performance reviews and remuneration of Staff in Control Functions is directly overseen by the Board or its designated committee/s. 1-8 8.2 Financial Institutions must ensure that a significant proportion of the total remuneration is fixed for Staff in Control Functions. 2-8 8.3 Performance reviews for Staff in Control Functions must be based on effectiveness and independence of their respective functions and not financial/revenue contribution. 3-8 8.4 The methods used for determining the variable remuneration of Staff in Control Functions must not compromise Staff’s objectivity and independence. 4-8 8.5 The potential for Conflicts of Interests that may compromise the integrity and objectivity of the Staff in Control Functions must be mitigated by ensuring that, inter alia: 5-8 8.5.1 Remuneration is based on performance measures principally linked to the effective achievement of the objectives of the respective Control Function; 1-5-8

33 CBUAE Classification: Public 8.5.2 Performance measures represent the right balance between objective assessments of the control environment and the quality, impact and efficiency of outputs of the Control Functions; 2-5-8 8.5.3 Remuneration is independent of the performance of any business unit/s which is subject to the oversight of the relevant Control Function; and

3-5-8 8.5.4 The remuneration package is adequate to attract and retain Staff with the requisite qualifications, skills, knowledge and experience to discharge their roles effectively and to improve their competence and performance. 4-5-8 Article (9): Remuneration of Material Risk Takers 9.1 Financial Institutions must ensure that there is an appropriate mix of fixed and variable components of remuneration of Material Risk Takers, with appropriate criteria and adequate parameters set for allocating cash versus other forms of remuneration, including shares, where applicable. 1-9 9.2 The structure and combination of forms of remuneration awarded, including cash and shares must vary depending on the position and role of the Material Risk Taker, and be 2-9

34 CBUAE Classification: Public consistent with the approved risk appetite and tolerance of the Financial Institution. 9.3 Performance adjustments for Material Risk Takers must be effectively implemented within the remuneration framework to allow the Financial Institution to adjust remuneration to take account of risks that have been subsequently realised. . 3-9 9.4 A proportion of the total remuneration of Material Risk Takers must be performance-based. Contract provisions must be included to reflect that remuneration can be reduced or reversed based on poor performance, realised risks, misconduct and/or violations of laws, Regulations or policies, prior to the vesting of remuneration. 4-9 9.5 A minimum of 40% of the variable remuneration of Material Risk Takers must be payable under deferral arrangements over a minimum of three (3) years. The deferral may be set for a longer period based on the nature of the risks of the Financial Institution. The proportion of remuneration that is variable must increase in line with the level of seniority and/or responsibility. 5-9 9.6 For Senior Material Risk Takers, the percentage of variable remuneration that is deferred must be a minimum of 60% of total variable compensation under deferral arrangements of a minimum of five (5) years. The deferral may be set for a longer period based on the nature of the risks of the Financial Institution. The proportion of 6-9

35 CBUAE Classification: Public remuneration that is variable must increase in line with level of seniority and/or responsibility. 9.7 For Material Risk Takers who have been in the role for a period of less than twelve (12) months in a given performance year, the Financial Institution must assess the appropriateness of applying the requirements herein to only a proportion of the Person’s variable remuneration, on a pro-rata or other justifiable basis, aligned with the approved remuneration policy. 7-9 9.8 Material remedial or other actions requested by the Central Bank, including as a result of onsite examinations, should generally be reflected in the performance assessments of Material Risk Takers and therefore must be specifically linked to performance outcomes and in turn the remuneration of the Person. 8-9 المادة )10(: مكافآت لجنة الرقابة الشرعية الداخلية ISSC the of Remuneration :)10 (Article 10.1 The total of remuneration of the ISSC must be fixed and therefore must not be linked to the financial performance of the Financial Institution, profitability of Shariah-compliant products or volume of Shariah approvals issued. Remuneration of the ISSC must be set based on the: 10.1.1 The scope and complexity of the Financial Institution’s activities; 1-1-10

36 CBUAE Classification: Public 10.1.2 The time commitment and responsibilities of the member; and 2-1-10 10.1.3 Market benchmarks for similar Financial Institutions. 3-1-10 10.2 Remuneration must be paid to ISSC members by the Financial Institution directly and must not be paid through intermediaries. 10.3 Remuneration details of the ISSC, including, amounts, timelines and payment arrangements must be clearly stated in all relevant documents including the engagement and appointment letters and contracts. 10.4 Remuneration of the ISSC must only be negotiated at the time of renewal of contracts. 10.5 Remuneration of the ISSC must be reviewed periodically and at least once every three (3) years to ensure continued fairness and alignment with market practices and regulatory requirements. Benchmarking may be used to support this review but must not undermine independence, or result in excessive compensation. The Central Bank, in its sole discretion, may require more frequent reviews. .

37 CBUAE Classification: Public 10.6 The ISSC remuneration review process must not be used to undermine the independence of the ISSC. المادة )11(: المكافآت المتغيرة Remuneration Variable :)11 (Article 11.1 Financial Institutions must ensure alignment between performance-based incentives with the long-term value creation and the time horizon of risks to which the Financial Institution may be exposed. In so doing, Financial Institutions must ensure that total variable remuneration does not limit its capacity to preserve, augment or strengthen its capital base. 11.2 Financial Institutions must ensure that, at a minimum, 50% of variable remuneration of Material Risk Takers is awarded in shares or equivalent ownership interests or share-linked, or equivalent non-cash instruments in the case of non-listed Financial Institutions, as long as these instruments create incentives aligned with long-term value creation and the time horizons for risks to be realised. The remaining portion of the deferred remuneration can be paid as cash, which vests gradually. . 11.3 Financial Institutions must ensure that total variable remuneration is considerably reduced where negative financial performance is recorded, taking into account both current remuneration and reduction or elimination of remuneration amounts previously earned, including through Malus or Clawback mechanisms.

38 CBUAE Classification: Public 11.4 The Central Bank may limit the amount of total variable remuneration of a Financial Institution, or any business unit within the Financial Institutions, in any given period, to ensure the safety and soundness of a Financial Institution or the stability UAE financial sector. 11.5 The variable component of remuneration must be subject to prudent limits set in the remuneration policy and aligned with the law and requirements set in this and other applicable Regulations. 11.6 The criteria used by the Financial Institution in determining variable remuneration must be performance based and underpinned by an assessment of risk￾adjusted performance. The criteria must therefore: 11.6.1 consider the Staff’s performance, in addition to the performance of the business unit and the Financial Institution as a whole, where relevant. The criteria must not, directly or indirectly, incentivise inappropriate risk taking; 1-6-11 11.6.2 be clearly defined, documented and objectively measured; 2-6-11 11.6.3 not consider volume or growth criteria in isolation; and 3-6-11

39 CBUAE Classification: Public 11.6.4 be based on both financial and non-financial considerations, where appropriate. 4-6-11 11.7 Remuneration must be adjusted to take into account all tangible and intangible risks such as reputational, liquidity, conduct, and cost of capital. The Financial Institution’s risk adjustment approach to determining variable remuneration, must reflect ex-ante and ex-post risk adjustments. 11.8 Risk adjustments must take into consideration the time horizon used to measure performance in addition to the quality of the performance measure used. Stronger risk adjustments may be more appropriate where measurement periods are short and few losses are considered in the measurement of performance. 11.9 Financial Institutions must ensure that consideration is given to the following in the calculation and allocation of variable remuneration: 11.9.1 adjustments for current and future risks; 1-9-11 11.9.2 required capital and liquidity to support the conduct of business, and the risks and the related costs; and

2-9-11 11.9.3 the likelihood and timing of the Financial Institution receiving 3-9-11

40 CBUAE Classification: Public potential future revenues included in current earnings. 11.10 Financial Institutions must effectively make use of performance adjustments to align variable remuneration outcomes with performance and risk outcomes. Performance adjustments may take the form of reductions to in-year variable remuneration, Malus and Clawback. 11.11 Financial Institutions must ensure that all variable remuneration is subject to forfeiture or reduction through performance adjustment, the amount of which to be determined by a comprehensive assessment of all relevant criteria. 11.12 Performance adjustments must be considered even in the event where an incident does not result in costs or losses to the Financial Institution. 11.13 Financial Institutions must ensure that Staff are prohibited from and undertake to avoid using hedging strategies to circumvent or undermine the risk alignment effects embedded in remuneration arrangements. This prohibition must be clearly addressed in related policies and contracts. 11.14 The remuneration policy must clearly stipulate that the Financial Institution must not pay any remuneration to, or for the benefit of Staff via any means which could undermine the effect or intent of the

41 CBUAE Classification: Public requirements established in this Regulation. The Financial Institution must also include in its remuneration policy, applicable contracts and other relevant documents, prohibitions against the following and related, stringent consequences for breaches: 11.14.1 acquiring any indemnification and/or guarantee on behalf of Staff against the consequences of breaching any obligations under this Regulation; or against the application of in-period adjustment, Malus or Clawback; and 1-14-11 11.14.2 hedging by Staff who receive shares or share-linked deferred, variable remuneration, of their exposure to the share price risk before the share or share-linked remuneration is fully vested and able to be sold for cash by Staff. . 2-14-11 Article (12): Share-based Components of Remuneration 12.1 Financial Institutions’ remuneration offered in shares or share-linked instruments must be subject to an appropriate share retention policy. 12.2 Financial Institutions must ensure that where share-based components of variable remuneration, including shares and share options are used, appropriate safeguards

42 CBUAE Classification: Public are implemented to align incentives with the Financial Institution’s longer-term interests. Such safeguards may include: 12.2.1 vesting restrictions which ensure that the shares do not vest for a minimum specified period after they are awarded; 1-2-12 12.2.2 holding restrictions which prescribe that share options or other similar rights cannot be exercised for a minimum specified period after they are awarded; and 2-2-12 12.2.3 retention restrictions which stipulate that a specified proportion of the shares awarded must be held until the cessation of the employment or engagement of the Person or a specified period which extends beyond their employment/engagement. 3-2-12 12.3 A Financial Institution must not accelerate the vesting of unvested variable remuneration or curtailing of any holding restrictions for a Relevant Person, upon cessation of employment or engagement by the Financial Institution, unless specific exceptions have been provided for in the approved remuneration policy. If that Person is eligible for any unvested, variable remuneration, it must be subject to the same vesting conditions as those for a Person employed or engaged by the Financial Institution.

43 CBUAE Classification: Public المادة )13(: مدفوعات الحوافز Payments Bonus :)13 (Article 13.1 Any bonus pool established should be determined, giving due consideration to current risks, expected losses, estimated unexpected losses and stressed conditions associated with the Financial Institution’s activities. 1-13 13.2 Any guaranteed bonuses should generally not be offered by Financial Institutions, as they are not consistent with sound risk management and performance- based rewards. Exceptional minimum, guaranteed bonuses should generally only apply in the context of new Staff and be limited to their first year of employment/engagement with the Financial Institution. Any such award of bonus must be subject to approval by the Board. 2-13 13.3 Bonus awards must take into consideration the Staff’s non-financial related performance, including, but not limited to, compliance with the Central Bank Law, applicable Regulations and internal policies; adequate follow up and remediation of internal audit and/or Central Bank recommendations; and alignment with risk management objectives. 3-13 13.4 The aggregate of all bonus awards must not compromise the Financial Institution’s viability. The Financial Institution must therefore ensure that a bonus pool does not, in any way, impede its capital preservation or build-up objectives. 4-13

44 CBUAE Classification: Public المادة )14(: مدفوعات الفصل من العمل Payments Severance :)14 (Article 14.1 Where a Financial Institution makes severance payments, the maximum level of severance pay and the criteria for determining the amount of the payment must be established in the approved remuneration policy. 1-14 14.2 Severance payments must be subject to appropriate governance controls and limits and must be aligned with the Financial Institution’s overall financial condition and performance over an appropriate, justifiable time horizon. 2-14 14.3 Severance payments must be related to performance over time and must generally not be payable in the case of failure or threatened failure of the Financial Institution, specifically to a Person who has been found, through the appropriate processes, to have contributed to the failure or threatened failure of the Financial Institution. 3-14 14.4 Severance payments must not be used to compensate for variable remuneration that has been reduced or reversed, in line with the application of the requirements of this Regulation or any other Regulations. 4-14 14.5 Severance payments must not be awarded where there is an obvious failure which results in the dismissal of the Person. 5-14

45 CBUAE Classification: Public Article (15): Reporting and Disclosures واإلفصاح اإلبالغ :(15 )المادة 15.1 A Financial Institution must document and report the results of the annual and independent reviews established in Article (2) of this Regulation to the remuneration committee and the Board, immediately following the timely completion of the reports. The remuneration committee, must prioritise the review of the reports and take prompt action to ensure the efficient implementation of recommendations arising from the reviews. 1-15 15.2 A Financial Institution must make clear, comprehensive, meaningful, consistent and comparable public disclosure of information on its remuneration framework and practices on a financial year basis. The format and timeframes for the disclosures may be set by the Central Bank. 2-15 15.3 Financial Institutions must disclose annually in their corporate governance statement, the salient features of their remuneration framework and systems including inter alia: 3-15 15.3.1 the design and operation of the remuneration structure, and frequency of review; 1-3-15 15.3.2 a summary of the remuneration policy; 15.3.3 the types of remuneration offered to Material Risk Takers and the parameters used for 3-3-15

46 CBUAE Classification: Public determining their allocation, for example, cash and shares, fixed and variable; 15.3.4 the structure and independence of remuneration for Staff in Control Functions and the ISSC; 4-3-15 15.3.5 the links between performance and risk outcomes and remuneration; and a summary of the methodology for performance measurements and adjustments; 5-3-15 15.3.6 the deferral policy and vesting criteria, Malus and Clawback arrangements and other deferral structures, and the implications on the Financial Institution’s risk profile; and 6-3-15 15.3.7 the governance structure, composition and the mandate of the remuneration committee. 7-3-15 15.4 Financial Institutions must disclose, in the audited annual financial statements, the total remuneration paid to relevant categories of Staff, including Senior Management, Material Risk Takers, Senior Material Risk Takers, Staff in Control Functions and any of these roles which are Outsourced. The disclosure must include the total number of Persons in each category, the totals for fixed and variable 4-15

47 CBUAE Classification: Public components of remuneration across categories and the forms of payment. 15.5 A Financial Institution must report on the following, at a minimum, to the Central Bank on an annual basis and no later than three (3) months following the end of the financial year to which the reporting relates. The Central Bank may develop reporting forms to facilitate the reporting on: 5-15 15.5.1 Details of remuneration, including total aggregate remuneration, structure, deferral and vesting details, for specific categories of Staff, including Material Risk Takers; 1-5-15 15.5.2 Total remuneration, including total fixed and variable remuneration and number of Persons broken down by business line; 2-5-15 15.5.3 Details of remuneration of the top 5% of highly compensated Staff of the Financial Institution; 3-5-15 15.5.4 Forms and totals of variable remuneration, reporting by cash, shares, share-linked instruments and other forms; 4-5-15

48 CBUAE Classification: Public 15.5.5 Total outstanding deferred remuneration, reported by amounts vested and unvested and related timeframes; 5-5-15 15.5.6 Total deferred remuneration awarded, paid out and reduced through performance adjustments; and 6-5-15 15.5.7 Sign-on, bonus and severance payments made and number of Persons. 7-5-15 15.6 Financial Institutions must conduct periodic reviews of all employment/engagement contracts against applicable law and Regulations and the approved remuneration framework including the remuneration policy to ensure alignment with, inter alia, the remuneration structure, performance assessment criteria and remuneration adjustment measures. These reviews must be conducted every three (3) years at a minimum and the results of these reviews must be reported to the Board. 6-15 15.7 Financial Institutions must undertake ongoing reviews of Staff to identify and designate Material Risk Takers. The complete list of Material Risk Takers, specifically identifying Senior Material Risk Takers, must be submitted to the Central Bank on request. 7-15

49 CBUAE Classification: Public Article (16): Enforcement and Sanctions والجزاءات اإلنفاذ :(16 )المادة 16.1 Violation of any provision of this Regulation may subject the Financial Institution to supervisory action, administrative action and/or financial sanctions as deemed appropriate by the Central Bank. . 1-16 16.2 Without prejudice to the provisions of the Central Bank Law, supervisory action and sanctions by the Central Bank may include withdrawing, replacing or restricting the powers of Senior Management or members of the Board, providing for the interim management of a Financial Institution, or barring individuals from the UAE financial sector. 2-16 Article (17): Interpretation of Regulation النظام تفسير :(17 )المادة 17.1 The Regulatory Development Department of the Central Bank shall be the reference for interpretation of the provisions of this Regulation. 1-17 Article (18): Publication and Application والتطبيق النشر :(18 )المادة 18.1 This Regulation shall be published in the Official Gazette and shall come into effect on the date of its publication. 1-18 18.2 Financial Institutions must conduct an assessment of their existing remuneration frameworks and their alignment with the requirements of this Regulation. Financial Institutions must submit to the Central Bank a detailed report on this assessment 2-18

50 CBUAE Classification: Public and the actions taken and/or planned actions to address any identified gaps and the related timeframes and accountabilities. This report must be submitted to the Central Bank within 180 days of the effective date of this Regulation. The Central Bank may decide on the appropriateness of the action plan and may request regular updates on its implementation, at specified intervals. ُ 18.3 Within fifteen (15) months of the effective date of this Regulation, Financial Institutions’ remuneration frameworks must be in full compliance with the requirements of this Regulation and all existing contracts must be reviewed for compliance with this Regulation. The Central Bank, at its sole discretion, may grant an extension to this timeframe, on a case-by-case basis. 3-18 Khaled Mohamed Balama Governor of the Central Bank of the UAE