The Central Bank of the United Arab Emirates (UAE) has issued a new regulation designed to develop specialised banks that are obligated to provide services solely to UAE nationals and residents.

The specialised banks can only operate using dirhams, the currency of the UAE.

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The banks are mandated to follow unique banking rules designed specifically to serve the local residents. The rules cover account opening, card issuance, and retail and wholesale lending.

The regulation, which includes licensing, prudential and conduct requirements for the specialised banks, sets a minimum paid-up capital requirement of AED300m (£60m).

It also sets the total consolidated assets of specialised banks which shouldn’t exceed AED25 billion.

The regulation allows the specialised banks to practice different financial activities to serve the local community, such as account opening, card issuance, and retail and wholesale lending.

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Operating in a “robust and prudent manner”

The objective of the new regulation is to provide a regulatory framework in which specialised banks can operate in the UAE financial sector in a “robust and prudent manner”, the central bank said in a statement.

It added that specialised banks must conduct their activities in UAE dirhams only and operate according to a low credit risk model.

They can be established either as a conventional specialised bank without Islamic windows or as an Islamic specialised bank, the central bank said.

The central bank stressed the importance of specialised banks’ compliance with all regulations, standards, and notices issued for the banking sector. They are only exempt from specific provisions contained in the new regulation which apply to specialised banks alone.