UAE Banks and Insurance Companies Face October 11 Deadline for Remuneration Rules

The Central Bank of the UAE issued Circular No. 5 of 2026 regarding remuneration and compensation schemes, setting October 11, 2026, as the deadline for covered institutions to submit detailed implementation reports on their remuneration systems, following a review of these systems and identification of gaps.

The circular mandates the deferral of at least 40% of variable remuneration granted to staff in key risk-taking roles over at least three years, rising to 60% for senior risk roles over at least five years, with 50% of the variable compensation awarded in shares or non-cash instruments. Requirements are scaled based on the size, complexity, and risk profile of the institution.

The circular introduces two adjustment instruments: the "malus" clause allows for the reduction of unvested deferred bonuses, while "clawback" permits the recovery of paid amounts upon discovery of losses or violations resulting from excessive risk-taking, gross negligence, governance failures, or regulatory fines. Hedging against bonus reductions is prohibited. Guaranteed bonuses are restricted to exceptional hiring cases, and may only be granted in the first year and with board approval.

This circular affects thousands of employees in the UAE banking and insurance sectors, including executives and risk specialists, reshaping year-end bonus distributions and deferring portions over several years. The rules require boards of directors to approve remuneration policies and establish a remuneration committee with independent members, alongside annual disclosures and reporting to the Central Bank within three months of the fiscal year-end, with penalties potentially including restricting management powers or exclusion from the sector.

What Do These Terms Mean?

Variable Compensation: The portion of an employee's remuneration linked to performance or results rather than a fixed salary, referring here to annual bonuses and performance rewards.

Bonus Deferral: Splitting the bonus and paying it over several years so the employee does not receive the full amount in a single year, aligning their interests with future outcomes.

Malus: A contractual clause allowing the reduction of unvested deferred bonuses if subsequent violations or losses occur prior to payout.

Clawback: A recovery clause allowing an institution to reclaim previously paid bonuses if violations or losses linked to the employee's performance surface later.