UAE Enhances Financial Sector Oversight with Critical Amendments to Article 121 of Federal Decree by Law No. (14) of 2018, Concerning the Central Bank and the Regulation of Financial Institutions and Activities

The United Arab Emirates “UAE” has taken a significant step forward in refining its financial regulatory framework by enacting a Federal Decree by Law No. (23) of 2022. This legislation amends certain provisions of the Federal Decree by Law No. (14) of 2018, which concerns the Central Bank and the regulation of financial institutions and activities. A focal point of this legislative update is the amendments to Article 121, which plays a crucial role in bolstering the supervisory and regulatory capacity of the UAE’s financial sector.

Understanding the Amendments to Article 121

Article 121 after amendments reads as below:

Protection of Clients of the Licensed Financial Institutions

  • The Central Bank shall create the regulations for protection of clients of licensed financial institutions, in proportion to the nature of the activities practiced by such institutions and the financial services and productions they provide.
  • The Central Bank may establish a unit with independent legal personality to receive and decide on the complaints of clients of the licensed financial institutions,. The Board of Directors shall issue a decision to establish such unit and determine its functions, rules of procedure and powers as well as the human resources and financial affairs regulations applicable thereto.
  • The Central Bank and licensed financial institutions shall jointly work to raise the community awareness about the types of banking services and financial products and the risks inherent in them, through all available means of communication and media, in accordance with the controls set by the Central Bank.
  • Licensed financial institutions may not charge interest on accumulated interest, i.e. compound interests, in respect of the facilities granted to clients. In this regard, the controls and rules set by the Central Bank in the control regulations issued thereby shall be followed.

Article (121 bis)

Credit Facility Guarantees

  • The licensed financial institutions shall obtain the sufficient guarantees for all types of facilities provided to the natural clients and private sole proprietorships, in accordance with the client’s income or the guarantee, if any, and the size of the required facilities, as determined by the Central Bank.
  • No application, action or plea filed to the competent judicial authorities or the arbitral tribunals by any licensed financial institution in respect of a credit facility provided for a natural person or a private sole proprietorship shall be accepted if such financial institution fails to obtain the guarantees referred to in Clause (1) of this Article.
  • The Central Bank may impose administrative and financial penalties which it deems appropriate on the licensed financial institutions which violate the provision of Clause (1) of this Article, in accordance with Article (137) of the present Decree-Law.”


The amendments to Article 121 of the UAE’s Federal Decree by Law No. (14) of 2018, focusing on the “Protection of Clients of the Licensed Financial Institutions,” along with the introduction of Article (121 bis) regarding “Credit Facility Guarantees,” present significant implications for both financial institutions and their clients.

Implications for Financial Institutions

  1. Enhanced Regulatory Obligations: Financial institutions are now subject to comprehensive regulations aimed at protecting clients. The requirement to adhere to specific practices related to the provision of financial services and products necessitates an overhaul of many institutions’ existing policies and procedures to ensure compliance.
  2. Establishment of a Complaints Unit: The Central Bank established a unit for receiving and deciding on complaints signifies a move towards more transparent and accountable financial services. This means additional procedural steps for financial institutions in handling complaints, potentially increasing operational complexities but improving customer satisfaction and trust.
  3. Increased Focus on Consumer Awareness: The obligation to collaborate in raising community awareness about banking services, financial products, and associated risks demands an investment in educational initiatives. Financial institutions will need to allocate resources towards these efforts, which could lead to better-informed clients but also represent an operational cost.
  4. Prohibition of Compound Interest: The ban on charging interest on accumulated interest for client facilities necessitates adjustments in how financial institutions structure their products and calculate interest. This could impact the profitability of certain products but enhances transparency and fairness for consumers.

Implications for Clients

  1. Greater Protection and Transparency: Clients stand to benefit from clearer regulations and protections concerning the financial services and products they use. The establishment of a dedicated unit for complaints offers a more direct avenue for resolving disputes, potentially leading to greater client satisfaction. The unit started its operations on the 7th of March 2023 under the symbolic name “Sanadak” which translates into “Your Support”, as an Ombudsman Unit catering to consumers of Financial Institutions and Licensed Insurance Companies. Sanadak is the first legally established independent Ombudsman Unit, with a focus on safeguarding consumers rights and resolving complaints that arise from dealings with Financial Institutions and Licensed Insurance Companies. Sanadak will assume all consumer complaint-handling duties previously carried out by the Central Bank of the UAE’s Consumer Protection Department and Insurance Dispute Resolution Committee. You can reach the unit via their website or via the tollfree number 800SANADAK (800 7262325).
  2. Improved Financial Literacy: The emphasis on educating the community about financial services and products should lead to better-informed financial decisions by consumers. This increased awareness can help clients navigate the complexities of financial products and avoid potential pitfalls.
  3. Fairer Pricing Practices: The prohibition against compound interest protects clients from potentially exploitative interest calculations, likely leading to fairer overall costs for financial services.


Implications for the Financial System

  1. Strengthening of the Financial Ecosystem: These amendments aim to fortify the trust between financial institutions and their clients, which is fundamental to a stable and resilient financial system. By ensuring that financial practices are transparent, fair, and client-focused, the UAE is enhancing the overall integrity and sustainability of its financial sector.
  2. Promotion of Responsible Lending: Article (121 bis) emphasizes the need for financial institutions to obtain sufficient guarantees for credit facilities, aligning with responsible lending practices. This not only protects the interests of financial institutions but also safeguards clients from over-indebtedness, contributing to financial stability.
  3. Regulatory Compliance and Penalties: The potential for administrative and financial penalties for non-compliance with these new requirements underscores the seriousness of these amendments. Financial institutions are incentivized to adhere strictly to the regulations, ensuring a safer financial environment for all stakeholders.


In summary, the amendments to Article 121 of Federal Decree by Law No. (14) of 2018 and the introduction of Article (121 bis) represent a significant shift towards enhancing consumer protection, ensuring fair practices in the financial industry, and promoting a stable and transparent financial ecosystem in the UAE. These changes are expected to have long-lasting positive impacts on the relationship between financial institutions and their clients, contributing to the overall health and stability of the financial sector.

The Author

Stephanie Casada is an English lawyer registered as a legal consultant with The Government of Dubai Legal Affairs Department.

Stephanie’s professional journey is marked by her deep commitment to navigating the complexities of banking regulation. She specializes in advising banks, financial institutions, fintech companies and their clients on a wide array of legal issues, including compliance with federal and local banking laws, consumer protection, and corporate governance. Her proficiency in crafting strategic solutions to regulatory challenges has made her a trusted advisor in the industry.


This article is for information only and should not be used as legal advice. Always consult a qualified lawyer for your specific legal matters.