DUBAI, (Reuters) – The United Arab Emirates’ top regulator on Thursday issued a draft of new corporate governance guidelines for its banking sector, the first update in seven years in a region that has been criticised as lacking transparency.
The Central Bank’s guidelines are the latest efforts by authorities in the Gulf region to restore confidence in local banks, caught in a deep downturn as a result of the global economic and credit crisis.
Last year Dubai, one of seven emirates in the UAE, launched an anti-corruption drive, resulting in several high-profile arrests.
“Commercial banks are leading contributors to a successful UAE economy and are expected to show the way on high management standards and corporate governance,” Central Bank governor Sultan Bin Nasser al-Suweidi wrote in a foreword to the guidelines.
“If a bank fails it affects the whole economy so (banking) directors are the guardians of financial stability,” he added.
The governor urged banks to improve disclosure standards, increase transparency and to put risk committees in place.
“Such improvements will be value-adding and will reinforce the international competitiveness of UAE banks,” he said.
The corporate governance guidelines are based on international regulations, but the central bank emphasised they “are firmly rooted in and tailored to the national environment.”
Policymakers worldwide are seeking to reform the regulatory framework in response to the credit crisis. U.S. President Barack Obama announced plans on Wednesday to overhaul the U.S. financial regulatory system.
The Oman and UAE central bank chiefs expressed concern this week about commercial banks’ exposure to two troubled Saudi conglomerates.