Meeting UAE's new Consumer Protection Standards for banks

The UAE’s Central Bank issued a set of Consumer Protection Regulations and Standards in the first quarter of 2021 – to ensure that licensed financial institutions provide safe and responsible services to consumers. A discussion with Murtaza Shaikhally from Cedar Consulting on some of the new regulation’s key pillars and their implications.

Underpinning the credibility and success of any financial market is trust. In line with the UAE’s broader economic ambitions of becoming a global hub for financial services, the central bank has introduced a number of far-reaching regulatory changes, with the goal of further enhancing consumer trust in banks and other financial intermediaries (classified by the UAE as licensed financial institutions). 

“The goal is to adopt global regulatory best practices and implement them across all financial institutions in the UAE,” said Cedar Consulting associate partner Murtaza Shaikhally, acknowledging advanced and modern regulatory frameworks in Europe and the Far East as inspiration for the new framework. 

“This provides credence to the processes laid out by financial institutions, which benefits their own stability and boosts the economy as a whole.”

The set of changes introduced includes: stronger governance; transparent reporting and disclosure; consistency in conduct; diligent data protection; financial inclusion; stimulating responsible financing; systems to educate consumers via product factsheets and address their grievances; and compliance with Sharia law (where relevant).

Building compliance

Commercial banks, investment banks, funds and other licensed financial institutions are now tasked with complying with these changes, which will likely require targeted initiatives in each segment of the multifaceted regulatory paradigm. 

Institutions will need to review their governance and operating models, and update their charter defining roles, responsibilities and rules of conduct. Having re-engineered their processes and systems, controls and approvals, compliance and internal audit processes will need to be updated, as well as reporting across the full regulatory lifecycle.

On the consumer-facing side, FinTech platforms are already a popular choice to access financial services – momentum that can be leveraged to set up new omnichannel customer journeys; transaction information packages; and grievance-redressal systems. With the aim of building a better customer experience, institutions will need to review their data protection and storage processes, and ramp up how they inform consumers. 

According to Shaikhally, technology is set to play a key role on all fronts, with much of the added compliance requirements in-scope to be automated through advanced regulation technology (‘regtech’) solutions. Meanwhile, bringing the change to life will require a people change as well, spanning training efforts to bring staff on board and a cultural focus to ensure new ways of working are embedded. 

Stronger consumer trust aside, the new regulation paves the way for modernisation and digitalisation in UAE’s financial services sector – at a time when it is witnessing a flurry of growth activity. “With the sector growing by leaps and bounds in the UAE, the timing of these regulations will enable growing responsibly, promoting integrity and competitiveness and a establishing a fair playing ground for all players irrespective of the size,” concluded Shaikhally.