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Financial Institutions in UAE Face New Model Risk Management Regulations

The Central Bank of the United Arab Emirates (CBUAE) has introduced new regulations to ensure that financial institutions in the country manage model risk effectively. The regulations, known as Model Management Standards and Model Management Guidance, aim to improve the quality of models used by banks and reduce the risk associated with them.

Key Changes

The CBUAE has split the regulations into two parts:

• Model Management Standards (MMS): outlines general standards applicable to all models
• Model Management Guidance (MMG): provides technical guidance on specific aspects of model management

Financial institutions are expected to adhere to these regulations and conduct a thorough review of their model management practices.

Benefits

The new regulations aim to provide a harmonized approach to model development and deployment, making banks’ internal processes more efficient. This increased efficiency could save considerable costs that would usually be lost to inefficient time management practices. The regulations also largely follow similar regulations across the globe, allowing for banks to increase their international presence with minimal regulatory and compliance adaptations.

Consequences of Non-Compliance

Non-compliance with the new regulations can lead to:

• Fines
• Increased regulatory scrutiny
• Restrictions on future growth and lending

Financial institutions must take the necessary steps to ensure that they are in compliance with the regulations.

Qarar’s Expertise

Qarar is a leading risk consultancy company in the UAE, providing expert services to help financial institutions navigate the new model risk management regulations. Qarar’s team of experts has combed through each of the 500+ policies and formulated them into easy-to-understand snippets for an audit and remediation plan.

Expert Consultancy Services

Qarar offers a range of expert services, including:

• Gap Assessment: Identify areas where financial institutions need to improve their model management practices
• Remediation Planning: Develop a plan to address gaps in model management practices
• Communication with Regulators: Ensure that financial institutions are in compliance with regulations and maintain open communication with regulators
• Project Management: Oversee the implementation of remediation plans and ensure timely completion

Alternatively, Qarar’s team can also look at individual snippets of the regulations to shed light on what is required and formulate a specific action plan.

Contact Us

For more information about Qarar’s Model Risk Management services and the UAE Central Bank regulations, please contact us directly:

• Tel: +971 4 375 9363
• Email: smartsolutions@qarar.org