Institutional Mandate and Legal Basis
The Central Bank of the UAE was established in 1980 under Federal Law No. 10, which was subsequently replaced by the Decretal Federal Law No. 14 of 2018 Regarding the Central Bank and Organization of Financial Institutions and Activities. The CBUAE holds the exclusive authority to issue national currency, formulate and implement monetary policy, and supervise and regulate financial institutions operating in the UAE. Its legal framework grants it operational independence in pursuing its statutory objectives of price stability, financial system soundness, and consumer protection.
Role Within UAE Governance Structure
The CBUAE is a federal institution that operates independently of the UAE’s fiscal authorities while coordinating closely with the Ministry of Finance and other economic agencies. The central bank serves as the banker and financial adviser to the federal government and plays a critical role in managing the UAE’s foreign exchange reserves. Its regulatory authority extends across all licensed banks, exchange houses, finance companies, and insurance firms operating in the country, with the exception of entities regulated by the financial free zones of ADGM and DIFC.
Key Functions and Activities
The CBUAE’s core functions include issuing and managing the UAE dirham, maintaining the currency’s peg to the US dollar, setting reserve requirements and interest rate policies, licensing and supervising financial institutions, and operating national payment systems. The central bank conducts regular on-site and off-site inspections of supervised entities and enforces compliance with anti-money laundering and counter-terrorism financing regulations. The CBUAE also manages the national credit bureau and consumer protection functions, ensuring transparency and fairness in financial services delivery.
Relationship to We the UAE 2031 Vision
The CBUAE’s mandate directly supports the We the UAE 2031 vision’s goals for a robust, diversified, and globally competitive economy. Financial stability and a sound banking system are foundational to attracting foreign investment, supporting entrepreneurship, and enabling the large-scale infrastructure projects envisioned under the 2031 framework. The central bank’s efforts to modernize payment systems, promote financial inclusion, and adopt financial technology innovations align with the vision’s emphasis on digital transformation and economic accessibility.
Recent Developments and Strategic Initiatives
The CBUAE has undertaken significant modernization initiatives, including the launch of a digital currency strategy and the development of a central bank digital currency pilot program. The central bank has strengthened its supervisory framework with enhanced prudential standards aligned with Basel III requirements and expanded its fintech regulatory sandbox to encourage innovation. The CBUAE has also deepened its anti-money laundering and sanctions compliance infrastructure, reflecting the UAE’s commitment to international financial integrity standards. Cross-border payment system partnerships have been pursued to enhance the UAE’s role as a regional financial hub.
Leadership and Governance
The CBUAE is led by a Governor appointed by federal decree, supported by a Board of Directors that includes government representatives and independent members. The governance structure ensures both institutional independence in monetary policy decisions and coordination with broader government economic strategy. The central bank maintains specialized departments for banking supervision, monetary policy, financial stability, payment systems, and consumer protection, staffed by professionals with domestic and international regulatory expertise.