The Central Bank of the United Arab Emirates (CBUAE) issued its new Remuneration Regulation for Banks and Insurance Companies (Circular No. 5/2026) (the Regulation) on 13 March 2026, introducing a comprehensive governance framework addressing remuneration across UAE-regulated banks and insurance companies. The Regulation came into effect on 14 April 2026.
The Regulation applies to all banks and insurance companies regulated by the CBUAE, with implementation required within 15 months of its effective date. Institutions must also assess their existing remuneration frameworks within 180 days of the Regulation coming into effect and report their findings and implementation plans to the CBUAE.
A Shift from Remuneration to Governance
The Regulation makes clear that remuneration is no longer viewed as simply an HR or compensation issue. Instead, remuneration must form part of an institution's overall governance and risk management framework.
Financial institutions are now required to maintain a Board-approved remuneration framework that, among other things
- supports long-term value creation;
- aligns remuneration with strategic objectives and approved risk appetite;
- promotes prudent risk-taking; and
- discourages excessive or inappropriate risk-taking.
Institutions must review their remuneration framework at least annually, with an independent comprehensive review taking place every three years.
Increased Board Accountability
The Regulation significantly expands the Board’s responsibilities.
Boards are ultimately responsible for approving the remuneration framework, overseeing its implementation, and ensuring remuneration practices comply with applicable law and support the institution’s long-term interests. Boards must also approve the remuneration of Material Risk Takers (as further described below) and employees in control functions, establish a remuneration committee, and ensure annual independent reviews of remuneration practices are undertaken.
The Regulation also requires closer interaction between the remuneration committee, risk committee, and control functions to ensure remuneration decisions appropriately reflect risk outcomes.
Identifying ‘Material Risk Takers’ and ‘Senior Material Risk Takers’
One of the important features of the Regulation is the requirement for institutions to identify employees whose activities materially affect the institution’s risk profile.
The definition of a Material Risk Taker extends beyond senior executives and includes individuals who can:
- approve significant lending or underwriting decisions;
- accept material or non-standard risks;
- make significant investment decisions; or
- otherwise materially influence the institution's overall risk profile.
Institutions must maintain and regularly review a formal list of Material Risk Takers, with Board approval required annually.
Variable Remuneration Under Increased Scrutiny
The Regulation introduces detailed requirements governing variable remuneration.
In particular, the Regulation requires that
- variable remuneration must be genuinely performance-based and reflect both financial and non-financial performance;
- performance assessments must incorporate risk-adjusted outcomes;
- remuneration must be capable of reduction where risks subsequently materialise; and
- institutions must consider conduct, compliance, and governance outcomes when determining awards.
The Regulation expressly requires remuneration policies to address malus and clawback provisions.
Mandatory Deferral Requirements
A significant practical change concerns deferred remuneration. For Material Risk Takers, at least 40% of variable remuneration must be deferred over a minimum of three years.
For Senior Material Risk Takers, at least 60% of variable remuneration must be deferred over a minimum of five years.
In addition, at least 50% of variable remuneration for Material Risk Takers must be delivered in shares, share-linked instruments, or equivalent non-cash instruments where appropriate.
New Expectations Around Employment Contracts
Institutions must review employment contracts to ensure they properly reflect the remuneration framework. In particular, contracts should clearly provide that variable remuneration
- is discretionary;
- remains subject to performance and risk adjustment;
- may be reduced or forfeited;
- is subject to malus and clawback; and
- cannot be protected through hedging arrangements or indemnities.
Institutions are also required to review all employment contracts at least every three years to ensure continuing compliance.
Guaranteed Bonuses and Severance Payments
The Regulation places new controls on guaranteed bonuses and severance payments.
Guaranteed bonuses should generally not be offered except in limited circumstances for newly recruited employees during their first year of employment and with Board approval.
Enhanced Disclosure Obligations
Financial institutions are also subject to increased reporting obligations. These include annual public disclosures concerning remuneration structures, deferred remuneration arrangements, and links between remuneration and risk outcomes. Institutions must also submit detailed remuneration reports to the CBUAE annually.
Looking Ahead
The Regulation represents an evolution in the UAE’s regulatory expectations around executive and employee remuneration. Rather than focusing solely on pay structures, it seeks to embed remuneration into institutions' wider governance frameworks.
For banks and insurance companies, implementation is likely to require coordinated input from legal, HR, risk, compliance, internal audit, and remuneration committees. In particular, employment contracts, incentive arrangements, and policies should be reviewed early to ensure they align with the new requirements before the implementation deadline.