The new UAE Central Bank law: Early intervention and resolution regime

Over the past decade, the UAE has sought to modernize and implement a workable and functional bankruptcy framework to improve its economic activity and stability. As this framework has evolved, much like the evolution of other international restructuring laws, there has been focus on early intervention, prevention and a favouring of restructuring processes. Features such as obtaining new money financing and moratoriums have been introduced, echoing changes seen in the UK and elsewhere in recent years. However, the UAE Bankruptcy Law (Law no. 51 of 2023) (the “Bankruptcy Law”), provides that the Bankruptcy Law does not apply to any banks, financial institutions, and insurance companies licensed by the Central Bank where there is special regime enshrined in legislation relating to the restructuring or bankruptcy proceedings. The new banking law, Law No.6 of 2025 Regarding the Central Bank Regulation of Financial Institutions and Activities and Insurance Business (the “New Banking Law”) appears, on our read, to be this new special legislation.

Scope of Application

The New Banking Law repeals Federal Law No. 14 of 2018 (the “2018 Law”) and consolidates numerous regulatory changes introduced since its enactment.  The New Banking Law applies to all financial institutions, insurance businesses, financial activities, and persons subject to its provisions. Specifically, it covers:

• Licensed Financial Institutions: This includes banks, (re)insurance companies, and other financial institutions licensed by the CBUAE, whether incorporated in the UAE or operating as branches or subsidiaries of foreign entities (including those Islamic financial institutions).
• Other Entities: The New Banking Law also extends to any person (natural or juridical) carrying out, or seeking to carry out, a licensed financial activity in or from the UAE.
• Exclusions: As with the 2018 Law, the New Banking Law does not apply within the UAE financial free zones.

The two key developments are: (i) the expansion of licensed financial activities (see The new UAE Central Bank law: Expanding the regulatory perimeter for a digital era); and (ii) formalising a detailed early intervention and resolution regime with statutory powers for the Central Bank of the UAE (the “Central Bank”) to intervene at a much earlier stage of financial stress.

The resolution regime

The key power is now that the Central Bank is enabled to intervene and require recovery measures to be taken where a financial institution faces significant distress. The tools available to the Central Bank are wide, including ordering a merger or acquisition process, making changes to management, imposing capital and liquidity add-ons, or mandating strategic and structural changes. If it is deemed that resolution is required, the Central Bank’s powers extend to more drastic measures such as the appointment of administrators or non-consensual sale of assets. This can be done without creditor or shareholder consent, although there is a statutory order of payment for creditors enshrined in law.

It is still possible under the New Banking Law for a financial institution to go through court-supervised bankruptcy if the Central Bank agrees and the Central Bank will also have a level of oversight in these circumstances.

This has brought the UAE regime much closer to similar international regimes with the aim being intervention before a full-scale insolvency and to allow authorities to manage the failure of a financial institution with minimal impact on financial stability and without requiring bailout or loss to public funds. There are also other parallels to international regimes which all have fairness front and centre of the regimes, including the “no‑creditor‑worse‑off” test, a consumer protection regime and hard-wired tests for loss‑absorbing capacity.

It remains to be seen how the resolution regime plays out in practice but it is clear that the UAE is aligning itself with international standards for intervention and management of distress in financial institutions and driving towards more financial stability and a robust financial sector.