Federal Decree-Law No. 6 of 2025 Regarding the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business. The legislation repealed and replaced Federal Decree-Law No. 14 of 2018, and forms part of a wider programme designed to modernise the UAE’s financial sector, strengthen regulatory oversight and enhance confidence in the banking system.
The new law came into force on 16 September 2025 and significantly expands the powers of the Central Bank of the UAE (“CBUAE”) in relation to supervision, intervention, recovery and resolution of financial institutions.
From Deposit Protection to Financial Stability
Under the previous 2018 framework, Article 122 empowered the Board of Directors of the Central Bank, in coordination with the Ministry, to issue regulations for the protection of deposits and depositors’ rights, including regulations establishing a compensation fund.
That provision has now been repealed. Rather than relying exclusively upon a standalone deposit insurance corporation similar to the United States Federal Deposit Insurance Corporation (“FDIC”), the UAE has adopted a broader regulatory framework that combines prudential supervision, depositor protection measures, recovery planning, resolution mechanisms and enhanced intervention powers.
The focus of the modern regime is the preservation of financial stability.
Depositor Protection
Depositors holding funds with UAE-licensed banks continue to benefit from a framework designed to protect depositors and maintain confidence in the banking sector. The precise scope and limits of any applicable protection should be assessed by reference to current Central Bank regulations and guidance in force from time to time.
For larger depositors, prudent treasury management may include diversification of deposits across multiple institutions in order to mitigate risk.
Key Features of the UAE Framework
- Enhanced Regulatory Oversight The CBUAE exercises extensive supervisory authority over licensed financial institutions, including oversight of:
- Capital adequacy;
- Liquidity requirements;
- Corporate governance;
- Risk-management systems;
- Stress testing; and
- Regulatory reporting obligations.
The 2025 reforms significantly strengthen the Central Bank’s powers to intervene where signs of financial distress emerge, allowing earlier and more effective supervisory action.
- Comprehensive Recovery and Resolution Framework
A central objective of the 2025 legislation is the preservation of financial stability through recovery and resolution planning.Rather than relying solely on compensation after a bank failure, the framework seeks to ensure that financial institutions can be stabilised, restructured or resolved in an orderly manner while maintaining continuity of critical banking services.
This approach reflects international best practice and aligns the UAE more closely with modern global banking-resolution standards.
- Protection of Depositors
The UAE framework is designed to provide reassurance to depositors and small businesses while reducing the risk of destabilising withdrawals during periods of market stress.Confidence in the banking system is enhanced through a combination of regulatory oversight, prudential safeguards and resolution mechanisms.
For small financial disputes, the law establishes specialized judicial committees which have the power to issue binding decisions on banking disputes up to AED 100,000. The decisions of the committee will be final and immediately enforceable (unless the value of the dispute is higher than 100,000 AED in which case it may be challenged by the concerned institution or party).
- Strongly Capitalised Banking Sector
The UAE banking sector remains among the most strongly capitalised in the region.High capital ratios, robust liquidity positions and conservative regulatory requirements significantly reduce the likelihood of depositor losses arising from institutional failures.
- Confidence Through Stability
Perhaps the most significant feature of the UAE approach is its emphasis on prevention rather than cure.By combining rigorous supervision, early intervention powers and comprehensive resolution tools, the framework seeks to protect depositors by maintaining the resilience and stability of financial institutions before problems become systemic.
Practical Considerations for Depositors
While the UAE banking sector remains exceptionally robust, prudent depositors should continue to evaluate:
- The financial strength of their banking institutions;
- Credit ratings and public disclosures;
- Regulatory capital and liquidity levels;
- Government ownership or support structures;
- Concentration of deposits within a single institution; and
- Internal treasury policies governing liquidity and counterparty exposure.
For larger corporate depositors, diversification across multiple licensed institutions may provide an additional layer of risk management and strengthen treasury resilience.
The UAE’s modern depositor-protection framework represents a significant evolution in financial regulation. Rather than relying solely on a traditional deposit-insurance model, the UAE has adopted a comprehensive system combining prudential supervision, early intervention, recovery planning and resolution powers designed to preserve confidence in the banking system and protect depositors.
Chris is a Chartered Accountant, member of the ICAEW and on the list of approved Insolvency Practitioners of the DIFC and ADGM. He is also a UK, Cyprus and Romania licensed Insolvency Practitioner.
