Country Manual Credits
United Arab Emirates – Update 2024
BRP has updated its Country Manual Credits for United Arab Emirates (RS, BT & RT)
| Source of changes | Answers |
|---|---|
| Law / Regulation | Yes |
| New Position of the Authorities | No |
| Evolution of Expert’s Interpretation | Yes |
Regulatory Template
Material changes
The Country Manual has been reviewed to ensure that the content of all documents remains accurate and in line with the evolving interpretation of the current legal and regulatory framework. This manual just covers the federal jurisdiction of the State of the UAE, not the DIFC or the ADGM.
There is further guidance on reverse solicitation in the Regulatory Template. It is recommended to adopt a strict and prudent approach and comply with the following general principles:
The offer and performance of services should not be preceded by any form of promotional activities;
The reverse solicitation exemption should only apply when the foreign credit institution offers and performs the specific service which has been requested by the client. In other words, the response given by the credit institution must be limited to the specific enquiry raised by the client, with no additional services then being offered; and
The client’s request must be duly documented.
Security
Federal Law No. 50 of 2022, known as the New Commercial Code, has been enacted, replacing Federal Law No. 18 of 1993, the Old Commercial Code. Under Article 409(2) of the Old Commercial Code, loans could be secured with securities, subject to agreed-upon conditions. In contrast, Article 409(2) of the New Commercial Code now mandates that banks must possess adequate securities or guarantees for the loans they extend.
Guarantees
Federal Law No. 23 of 2022, titled the Banking Law Amendment, has come into effect, introducing several amendments to Federal Law No. 14 of 2018, which is the Banking Law. Notably, the new Article 121 (bis), dealing with Credit Facility Guarantees, imposes the requirement for licensed financial institutions to obtain adequate guarantees for all types of facilities offered to individual clients and private sole proprietorships. These guarantees should align with the client’s income or available collateral and correspond to the size of the requested facilities, as determined by the Central Bank. Furthermore, it stipulates that any applications, actions or pleas submitted by licensed financial institutions in relation to credit facilities granted to such entities will not be accepted if the financial institution fails to secure the required guarantees. Additionally, the Central Bank holds the authority to levy administrative and financial penalties, as it sees fit, on licensed financial institutions found in breach of these requirements.
In relation to data protection,
the RT notes that the cross-border transfer of personal data to countries that are not considered to provide an adequate level of protection is also permitted under certain circumstances, e.g. under a contract that applies the requirements of the UAE Data Protection Law (Standard Contractual Clauses), with the data subject’s express consent or if the transfer is necessary for the execution of a contract between the controller and the data subject or as part of a contract between the controller and a third party that achieves the interests of the data subject.
There is now a definition of Credit Product
Products that provide funding including any advance, loan/financing or
other facility in whatever form, including the giving of a guarantee or undertaking of any surety obligations for a consumer (Article 1 Consumer Protection Regulations).
The RT in the various sections on Sanctions (e.g. 1.1.5) notes that a credit institution may be liable under certain circumstances for civil claims.
Lending on property in the UAE – There is additional wording relating to mortgage lending secured on property in the UAE that granting mortgage credits to consumers in the UAE for the purpose of purchasing property in the UAE requires a license from the Central Bank, that is unless the foreign credit institution uses a security agent (being a local bank) for registering the lien and enforcing in case of default. To reflect this, there is an additional condition in the RT and BT for negotiation activities covering mortgage lending on property in the UAE that a local security agent should be used to register the mortgage and enforce it in case of default. This condition applies to all territorial scenarios – in the UAE, by remote means into the UAE and in the Credit Institution’s Country.
There is now a summary of the UAE Mortgage Loan Regulations that set out local lending standards for local credit Institutions.
Floating charges on assets are recognised in UAE law. Article 8 of Federal Law No. 4/2020 on Guaranteeing Rights Related to Movables as amended permits a security contract to secure one or more liability of any kind, whether current or future, ascertained or ascertainable, immediately operative or subject to a condition, fixed or variable.
Tax issues
The RT wording in relation to Reporting Requirements has been revised.
The Tax section of the RT has been updated to reflect the introduction of UAE Corporate Income Tax;
The RT wording in relation to a Permanent Establishment has been revised;
Non-material changes
There have been certain, non-material changes to the wording in the RT to improve clarity and comprehension.
Behaviour Template
The answers in the BT have been aligned to those contained in the RT.
Definitions and Concepts
The document Definitions and Concepts now includes a Concordance Table. This Table is designed to help the users of the Country Manual Credits easily recognize existing or potential interactions between the rules of different types of credits.
For more information, please contact us: info@brpsa.com
Geneva, November 5th, 2024