Federal Decree-Law No. (6) of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business introduced a consolidated regulatory framework governing financial institutions and insurance activities in the United Arab Emirates.
Among its key reforms, the Decree-Law establishes a formal framework for early intervention and resolution and designates the Central Bank of the UAE (CBUAE) as the Resolution Authority in the State for institutions placed under resolution.
The framework reflects broader international regulatory developments that favour earlier supervisory action and structured approaches to managing financial distress while limiting disruption to essential financial services.
The Central Bank as Resolution Authority
Under Article 143 of the Decree-Law, the Central Bank acts as the Resolution Authority in the UAE and may exercise resolution powers where a Licensed Financial Institution is placed under resolution.
Resolution differs from ordinary insolvency proceedings in both purpose and operation.
Traditional insolvency procedures are generally concerned with the realisation and distribution of assets following business failure. Resolution, by contrast, is a regulatory mechanism designed to manage institutional distress in an orderly manner while taking broader public-interest considerations into account.
These considerations may include maintaining confidence in the financial system, preserving continuity of important financial services and supporting an orderly restructuring or exit process.
Objectives and Regulatory Purpose
Although the Decree-Law does not prescribe a standalone list of statutory resolution objectives, its structure and the Central Bank’s wider mandate indicate that the framework is intended to support:
- financial system stability;
- timely supervisory action;
- orderly restructuring or market exit where necessary; and
- stronger institutional preparedness.
Early Intervention and Supervisory Action
A central feature of the framework is its emphasis on supervisory action before institutional failure occurs.
Where concerns arise regarding the condition, governance, compliance or operational soundness of a regulated institution, the legislation provides the Central Bank with mechanisms to intervene at an earlier stage.
Resolution Powers
Where a Licensed Financial Institution is placed under resolution, Article 143 grants the Central Bank extensive powers to restructure or wind down the institution.
These powers include the ability to:
- replace senior management, directors and other authorised individuals, and recover monies from responsible persons, including claw-back of incentives and remuneration;
- appoint one or more resolution administrators to manage or take control of the institution or parts of its business;
- terminate, assign or otherwise manage contracts, and buy or sell assets;
- write down or convert instruments and liabilities;
- ensure continuity of operational services and functions deemed necessary by the Central Bank;
- override certain shareholder rights to facilitate restructuring measures;
- transfer assets, liabilities, shares or business operations to third parties;
- establish bridge institutions to continue critical functions and viable operations;
- establish asset management vehicles for non-performing or difficult-to-value assets;
- implement bail-in measures to absorb losses and support continuity of critical functions;
- impose temporary stays on termination rights under contracts triggered by entry into resolution;
- impose moratoria on payments and restrict creditor enforcement actions, subject to statutory exceptions;
- restrict enforcement of security interests in relation to the institution’s assets, subject to specified carve-outs;
- modify certain terms of debt instruments and liabilities, including maturity, interest or payment timing;
- suspend trading in financial instruments relating to the institution; and
- disregard certain contractual default triggers when assessing events of default.
Safeguards and Legal Effects of Resolution Actions
The Decree-Law provides that actions taken by the Central Bank in the exercise of its resolution powers are not subject to prior approvals, consents or procedural requirements that would otherwise apply.
It also provides legal protection for individuals and entities acting in good faith in compliance with Central Bank requirements in connection with resolution actions.
In addition, the Central Bank may issue regulations relating to the resolvability of Licensed Financial Institutions and the implementation of its resolution powers.
Cross-Border Recognition of Resolution Actions
The Decree-Law includes a framework for cooperation in cross-border resolution scenarios.
Where a foreign resolution authority notifies the Central Bank that it has taken or intends to take resolution action in relation to an entity in its jurisdiction, the Central Bank may decide whether to recognise and give effect to that action, in whole or in part, or to refuse recognition.
This mechanism supports coordination in relation to internationally active financial institutions and cross-border group structures.
In essence, Federal Decree-Law No. (6) of 2025 marks a significant development in the UAE’s framework for supervising and managing distressed financial institutions.
By establishing a formal framework for early intervention and resolution and designating the Central Bank as the Resolution Authority in the UAE, the legislation expands the regulatory tools available to address financial distress in relation to financial institutions.
As supervisory practice develops, the framework is expected to become an increasingly important component of the UAE’s approach to financial-sector stability.
Chris is a Chartered Accountant, member of the Institute of Chartered Accountants in England and Wales (ICAEW) and the Emirates Association for Accountants and Auditors (EAAA), his details are on the list of approved Insolvency Practitioners in DIFC and ADGM. He is also a UK, Cyprus and Romania licensed Insolvency Practitioner.
