UAE Banks Federation, the representative and unified voice of UAE banks, confirmed that the Commercial Transactions Law 2022, which was issued by decree of His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the UAE (May God protect him), will boost Islamic financial and banking services, and strengthen the leading status of the UAE’s banking sector and the country's position as a global financial center.
The new law meets the requirements of the great and rapid development witnessed by Islamic banks and financial institutions and opens the doors to more Islamic Sharia-compliant financial services, which reinforces the UAE’s leading position in Islamic banking. UAE witnessed the establishment of the first Islamic bank in the world in 1975, it also enacted the Islamic Banking Law in 1985, and the Central Bank Law in 2018, which established the Higher Sharia Authority charged with defining the general rules, standards and principles for licensed financial businesses and activities that follow the provisions of Islamic Sharia while assuming control and supervision of licensed financial institutions' internal Sharia supervision committees.
The law, of which Chapter VI is singled out for commercial transactions of Islamic financial institutions, provides a comprehensive and advanced legislative framework for banking transactions that are compliant with the provisions of Islamic Sharia. It is considered the first of its kind in addressing Islamic financial and banking transactions. The law has 25 articles that define the concepts and financing formulas, deposits, investment accounts, Takaful insurance, investments and other transactions that are subject to the provisions of Islamic Sharia in a detailed and accurate manner.
H.E. Abdul Aziz Al-Ghurair, Chairman of UBF, said: “The Federal Law for Commercial Transactions 2022 confirms the futuristic and comprehensive vision of our wise leadership, which has contributed to reaffirming the UAE’s position among the most prominent economic and financial centers in the world. Financial and banking services that are in compliance with the provisions of Islamic Sharia are among the sectors that have found great interest in the UAE and have witnessed remarkable development over the past years under the wise guidance and oversight of the Central Bank of the UAE”.
H.E. added: “UAE Banks Federation places the development of Islamic banking services among its top priorities. Under the direct supervision of the Central Bank of the UAE, UBF has contributed to supporting Islamic financial institutions as part of its efforts to represent member banks in the federation and the banking sector. This is part of our role to enhance cooperation and interaction between member banks on common issues thus providing an effective platform for the exchange of ideas, opinions and information while leading efforts to devise solutions that meet customer needs and enable banks to build and develop sustainable competitive businesses that support the UAE society and economy”.
H.E. praised the distinguished efforts made by His Eminence Sheikh Dr. Ahmed Bin Abdulaziz Al Haddad, Chairman of the Higher Sharia Authority of the Central Bank of the UAE, Sheikh Dr. Osaid Al Kailani and Dr. Saad Al-Bakkali in defining and drafting articles related to commercial transactions of Islamic financial institutions.
The statistics of the Central Bank of the UAE reflect the significant growth of Islamic banks operating in the country, as their assets exceeded AED 600 billion by the end of the first half of 2022, and their bank credit facilities increased to AED 395.4 billion, an increase of 2.1% compared to the same period in 2021, deposits rose to AED 430.7 billion, and the total investments of Islamic banks amounted to AED95.4 billion by the end of June 2022.
Mr. Jamal Saleh, Director General of UAE Banks Federation, said: “The UAE continues to consolidate its economic position regionally and globally by setting and developing the frameworks and foundations to maintain this high rank. The issuance of the Commercial Transactions Law 2022 comes in this context as it meets the requirements of the rapid developments of Islamic financial services”.
He added: “As part of its initiatives to raise banking standards and provide the best services and products to customers, UAE Banks Federation has organized many conferences and events that discuss the challenges and opportunities for growth in Islamic banking services. The federation has also allocated a technical committee specialized in Islamic banking, which includes experts in the field, to discuss and find solutions to the issues and challenges facing the Islamic banking sector, conduct research and studies on the most important current issues and raise recommendations aimed at development”.
“UAE Banks Federation’s effort is to ensure that members follow the highest standards of governance, transparency, and prudent risk management. The federation also strives to enable talents, especially Emiratis, to capitalize on the opportunities created by the development of Islamic banking and financial services that meet the requirements of customers, as UBF seeks to increase Emiratization in the member banks,” Director General of UAE Banks Federation concluded.