UAE Issues Corporate Governance Guidelines For Banking Directors

by Lorys Charalambous, Tax-News.com, Cyprus

25 June 2009

The United Arab Emirates Central Bank has updated its corporate governance guidelines for UAE bank directors in an effort to increase transparency. It has been seven years since the Central Bank published Circular 23/00 regarding the requirements for an effective board of directors.

Central Bank governor Sultan Bin Nasser al-Suweidi commented:

“Commercial banks are leading contributors to a successful UAE economy and are expected to show the way on high management standards and corporate governance. Good governance is essential for the long-term success of a bank and good governance depends largely on the skills, experience and knowledge of the directors. If a bank fails it affects the whole economy so directors are the guardians of financial stability.”

“[The Central Bank] urges all bank directors to read and discuss these guidelines which reflect best international practice.”

“The guidelines will enhance the quality of directors’ leadership and significantly improve their board processes. Such improvements will be value-adding and will reinforce the international competitiveness of UAE banks. Banks with good governance and that are transparent in their disclosure practices are trusted by their stakeholders: shareholders, customers, employees and by their regulators.”

“Additionally, as some banks may begin to look for foreign direct investment, you will find that overseas investors and depositors demand high governance standards before they are willing to entrust their capital or their savings with a bank.”

Within the guidelines, the Central Bank targets areas where it believes increased supervision is required, and has urged directors to:

  • Improve disclosure standards and increase transparency
  • Be more aware of their duties and responsibilities to their banks and to all their investors, and understand more clearly what is expected of them
  • Appreciate the importance of managing conflicts of interest
  • Establish board committees to handle audit, remuneration and nomination matters and to ensure there are credit and risk committees in place.

“Banks in the UAE already accept the need to make improvements on these lines and a number of banks have begun the journey,” concluded al-Suweidi.

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