The Central Bank of the UAE (“Central Bank”) has issued a sweeping new remuneration regulation for Banks and Insurance Companies (Circular No. 5/2026, dated 13 March 2026), delivered via Notice No. CBUAE/BIS-RD/2026/2171, with effect from 14 April 2026 (the “Regulation”). It applies to every bank and insurance company—including reinsurers—operating in the UAE. The deadline for submitting a gap analysis is 11 October 2026, with full compliance expected and mandatory by 14 July 2027. Institutions must therefore act promptly.
Why This Matters
Until now, remuneration requirements sat within the Central Bank’s broader corporate governance framework and were limited in scope. The Regulation changes that. It introduces detailed, prescriptive rules covering the full spectrum of pay practices—from how fixed and variable remuneration is structured, to Board oversight, deferral arrangements, Malus and Clawback mechanisms, and public disclosure obligations. The goal is to ensure that pay frameworks drive prudent risk-taking, not reward excessive risk. The Regulation applies proportionally—taking into account each institution’s size, risk profile, organisational complexity and nature of operations. Institutions that are part of a group may rely on group-level remuneration arrangements, provided the group policy is Board-approved and satisfies all requirements under the Regulation.
Key Requirements at a Glance
Remuneration framework
Every financial institution must maintain a remuneration framework that promotes prudent risk management. Fixed pay must be stable, pre-determined, non-discretionary and irrevocable. Variable pay must be performance-linked and reflect long-term contribution. For instance, at least 50% of the variable remuneration of material risk takers must be awarded in form of shares, or equivalent ownership interest or non-cash instrument – to promote long term value creation, with remainder payable as cash, vested gradually.
Board and committee oversight
The Board carries ultimate responsibility for approving and overseeing the remuneration framework. A dedicated remuneration committee—with adequate independent, non-executive representation—must be established with clearly defined terms of reference.
Material risk takers
The Regulation requires institutions to identify material risk takers and apply enhanced pay rules to them, including mandatory deferral of at least 40% of variable remuneration for material risk takers over a minimum three year period and 60% of variable remuneration for senior material risk takers over a minimum five-year period.
Reporting and disclosure
Financial institutions must provide annual public disclosures on remuneration structures—including pay for material risk takers—and submit detailed reports to the Central Bank within three months of each financial year end.
Governance review required
These requirements demand a thorough review of internal governance documents. Articles of Association, remuneration policies, and employment contracts must all be checked—and where necessary updated—to align with the Regulation. Any provisions governing the approval, structure or payment of remuneration, particularly those relating to the Board, remuneration committee, material risk takers and control functions, must reflect the new regulatory standards. For instance, the Regulation provides that total variable remuneration is considerably reduced where negative financial performance is recorded.
Key Compliance Timelines:
| Obligation | Deadline |
|---|---|
| Submit comprehensive gap analysis and action plan to the Central Bank | 11 October 2026 |
| Full compliance with all requirements; review of existing contracts | 14 July 2027 |
| Annual reporting to the Central Bank | Within 3 months of financial year end |
Non-compliance carries serious consequences. The Central Bank may impose supervisory, administrative or financial sanctions—including withdrawing or restricting the powers of senior management or Board members, appointing interim management, or barring individuals from the UAE financial sector entirely.
How can Al Tamimi help?
The compliance deadlines are tight and the requirements are far-reaching. Their Banking & Finance, Insurance and Employment teams are ready to support you across the full scope of the Regulation, including:
- Advising on your compliance obligations under the Regulation;
- Conducting gap analyses of your existing remuneration frameworks and preparing the required action plan for submission to the Central Bank;
- Reviewing and updating your Articles of Association and remuneration policies, including fixed/variable structures, deferral arrangements, Malus and Clawback provisions;
- Providing guidance on governance requirements for your remuneration committee and Board; Reviewing employment contracts and engagement terms for compliance with the Regulation; and Assisting with your annual and triennial reporting and disclosure obligations to the Central Bank.
Key Contacts
Ali Awad, Partner, a.awad@tamimi.com
Ivor McGettigan, Partner, Head of Education, i.mcgettigan@tamimi.com
Anand Singh, Legal Director, a.singh@tamimi.com