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    CBUAE Proposes Tech Adoption Guidelines and Finalizes Outsourcing Rule

    June 17, 2021

    The Regulators in United Arab Emirates (UAE) jointly proposed guidelines for financial institutions adopting enabling technologies; the consultation was open for comments until June 30, 2021; these regulators include the Central Bank of the UAE (CBUAE), the Securities and Commodities Authority, the Dubai Financial Services Authority of the Dubai International Financial Center, and the Financial Services Regulatory Authority of Abu Dhabi Global Market. In addition, the CBUAE issued an outsourcing regulation and the accompanying standards for banks operating in UAE. Other recent CBUAE publications include the financial stability report for 2020 and the signing of a memorandum of understanding (or MoU) with the Central Bank of Egypt on the information exchange mechanisms to facilitate supervisory and financial stability mandates.

    The proposed guidelines on adoption of enabling technologies set out principles and best practices for financial institutions when adopting enabling technologies for the development or offering of innovative products and services. The enabling technologies include application programming interfaces or APIs, big data analytics and artificial intelligence, biometrics, cloud computing, and distributed ledger technology. The guidelines are intended to promote safe and sound adoption of such technologies by financial institutions across UAE, to enable proactive and appropriate management of the risks arising from the adoption of innovative activities. While developing the guidelines, the Regulators have considered both international standards and industry best practices. The guidelines will apply to all financial institutions that are licensed and supervised by any of the Regulators and to those who utilize the enabling technologies, irrespective of the financial activities conducted. The final guidelines are planned to be issued in the second half of 2021, subject to the outcome of the public consultation. 

    The regulation and the accompanying standards on outsourcing aim to ensure that banks are appropriately managing risks when outsourcing certain functions and cover the requirement for mandatory inclusion of board-approved policies and procedures for outsourcing activity in the governance frameworks of banks. The objective of the regulation is to establish the minimum acceptable standards for banks’ approach to managing the risks related to outsourcing arrangements with a view to ensure soundness of banks and contribute to financial stability. The accompanying standards supplement the regulation to elaborate on the supervisory expectations of CBUAE with respect to outsourcing arrangements. Through the introduction of the regulation on outsourcing, CBUAE seeks to ensure that bank approaches to managing the risks inherent in outsourcing arrangements are in line with the leading international prudent practices to contribute in enhancing financial stability. Under the regulation, banks operating in the UAE must obtain a notice of non-objection from CBUAE prior to outsourcing any material activity. The regulation and the accompanying standards shall be published in the Official Gazette and shall come into effect one month from the date of publication.

     

    Related Links

    Comment Due Date: June 30, 2021 (Tech adoption guidelines)

    Effective Date: Official Gazette + One Month (Outsourcing rules)

    Keywords: Middle East and Africa, UAE, Egypt, Banking, Insurance, Securities, Outsourcing, Artificial Intelligence, Cloud Computing, Distributed Ledger Technology, Financial Stability Report, MoU, API, Central Bank of Egypt, CBUAE

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