CBUAE Introduces New Remuneration Rules for Banks and Insurance Companies

The Central Bank of the UAE (CBUAE) has issued a new Remuneration Regulation (Regulation) for banks and insurance companies, introducing a significantly enhanced governance framework for remuneration across the UAE financial sector.

The Regulation reflects global regulatory trends that seek to strengthen the link between remuneration, risk management and long-term performance. It places greater accountability on boards, introduces prescriptive requirements for variable remuneration and expands disclosure and reporting expectations.

Financial institutions have 180 days, until October 8, to submit a gap assessment and remediation plan to the CBUAE and 15 months thereafter to achieve full compliance.

Table below provides a summary of the changes:

What Has Changed?

Boards Are Now Directly Accountable

Having a Nominations and Remuneration Board Committee is nothing new, but the Regulation places ultimate responsibility for remuneration governance with the board. Boards are expected to actively oversee remuneration outcomes, ensure alignment with risk appetite and challenge management recommendations where appropriate.

Material Risk Takers Must Be Identified

Financial institutions must formally identify individuals whose decisions materially influence the institution’s risk profile. It is no longer enough to solely rely on Committees – it is personal responsibility that is being brought in.

This extends beyond senior executives and may include underwriters, investment professionals, credit approvers and other key decision-makers.

Variable Pay Must Be Deferred

A significant proportion of variable remuneration must now be deferred over multiple years, creating a stronger link between compensation and long-term outcomes.

• 40% deferred for Material Risk Takers
• 60% deferred for Senior Material Risk Takers

Share-Based Compensation Becomes the Norm

At least half of variable remuneration for Material Risk Takers must be delivered through shares, share-linked instruments or equivalent non-cash instruments.

This is intended to reinforce long-term value creation and discourage excessive risk-taking.

Malus and Clawback Move to Centre Stage

Institutions must be able to reduce, cancel or recover remuneration in situations such as:

• Misconduct
• Fraud
• Regulatory breaches
• Governance failures
• Excessive risk-taking
• Poor financial outcomes

For many firms, this will require updates to policies, incentive plans and employment contracts.

Risk, Compliance and Internal Audit Must Remain Independent

The Regulation introduces enhanced protections for control functions, requiring remuneration arrangements that support independence and objectivity and avoid conflicts with business performance incentives.

Islamic Financial Institutions Face Additional Requirements

Specific remuneration rules now apply to Internal Shari'ah Supervision Committees (ISSCs), reinforcing independence and reducing potential conflicts of interest.

Disclosure Expectations Increase Significantly

The Regulation introduces extensive disclosure and regulatory reporting requirements covering:

• Remuneration governance
• Variable remuneration arrangements
• Deferred compensation
• Material Risk Takers
• Malus and clawback outcomes
• Senior employee remuneration

The Process for Implementation

If there is one key message, it is: Do not underestimate the time required for implementation. While 15 months may seem like a long time, but even the most straight forward program can take significant time, especially if the aim is to achieve ‘embeddedness’ across the organization.

The new Remuneration Regulation needs more of a transformation program than a pure regulatory remediation – as such we would look at the following key milestone: