The UAE Central Bank is to have a greater say about the appointment of bank directors as it seeks to improve the leadership of the country's lenders.
In future, the regulator will have the right to reject the choice of new board members at local banks.
"We are preparing a list of requirements [board members will have to meet] according to the circular," said Ibrahim al Hosani, a senior manager in the Central Bank's banking supervision and examination department. "We want banks and directors to be of a high standard and be in compliance with best practice."
Mr al Hosani did not specify the requirements that would be on the checklist. The regulator issued a circular to local banks on Tuesday, telling lenders they would need to seek approval before appointing board members.
"The Central Bank is keen to ensure that members of boards of directors of banks are individuals of appropriate academic qualification, adequate business and banking experience and a sound character," it said.
The move comes as the regulator seeks to rebalance financial regulations. Abu Dhabi Commercial Bank (ADCB) and Abu Dhabi Islamic Bank reshuffled their boards after both suffered heavy losses linked to investments turning sour. ADCB this week appointed Lord Davies of Abersoch, a former banker and UK government minister, as an adviser to its board of directors.
"This is a power the Central Bank should have," said Raj Madha, an analyst at Rasmala Investment Bank. "It's a good way for the Central Bank to exercise control over senior shareholders if the appointment of a board member is not in the public interest."
Other authorities around the world have already taken action to scrutinise the appointments of bank directors more closely. South Korean banks have been required since last year to report details of the external activities of their directors. In the US, the Federal Reserve tightened eligibility rules for bank directors with links to the Fed.
Governments in the UAE are already significant shareholders in local banks. National Bank of Abu Dhabi (NBAD) is 70 per cent owned by Abu Dhabi Investment Council (ADIC), a sovereign wealth fund. ADIC also owns almost 65 per cent of ADCB. The Abu Dhabi Royal Family owns 67 per cent of First Gulf Bank.
Emirates NBD is 56 per cent owned by the Investment Corporation of Dubai, with the investment arm of the Dubai Government also owning 20 per cent of Dubai Bank.
"This is a significant move in the direction of improved transparency about who is in senior positions and is aimed at protecting customers and investors," said a banking analyst, who asked to remain anonymous.
Under existing rules, the regulator vets all appointments of central management, including chief executives and branch managers, at UAE banks.
"The Central Bank will attach great importance to the competence, experience, character, integrity, qualifications of a candidate in assessing his suitability to a particular position," it said in rules outlined on its website. "Should a candidate be deemed to be unsuitable, the Central Bank may object to the appointment of such a person."