UAE Central Bank restricts structured retail product sales

The Central Bank of the United Arab Emirates (UAE) has surprised industry participants by clamping down on the sale of structured products to retail clients, disclosing new rules in a statement issued to banks on August 2.

In the statement, the Bank says it "has decided that it is not desirable that banks operating in the UAE sell structured products to their retail customers which include high net worth individuals."

The Bank defines a structured product as a "pre-packaged investment strategy which has embedded options related to a single security/stocks, a basket of securities, indexes, commodities, debt, credit and or/foreign currencies."

If a bank wants to sell structured products to its customers, it is now obliged to submit a written request to the Bank outlining relevant details and the rationale for an exemption from the new rule.

The move is understood to have come out of the blue for industry participants, who are now said to be in discussions with the Bank regarding clarification of the rule.END