The Central Bank of the UAE (CBUAE) has issued the new credit risk management (CRM) regulation and standards, effective from 30 November 2024 and applicable to all licensed financial institutions (LFIs).
LFIs incorporated in the UAE with foreign subsidiaries, affiliates or international branches must comply with the regulation on a consolidated basis. UAE branches or subsidiaries of foreign institutions must also apply the regulation and standards to their activities in the UAE and their reporting to the Central Bank. Each LFI is required to implement a comprehensive framework to manage the credit risk it assumes, ensuring its financial resilience. In this context, the regulation establishes the minimum acceptable practices for CRM and provisioning for LFIs.
The regulation aims to establish minimum requirements for LFIs with regard to effective CRM. This includes aligning risk appetite with strategy, as well as improving governance, oversight and internal controls across risk identification, measurement, reporting and transfer. The regulation and standards set minimum requirements for credit risk governance and management, including standardizing the definition of “default”.
The accompanying credit risk standards supplement the regulation and are mandatory and enforceable in the same manner as the regulation.
