Federal National Council approves law guaranteeing bond issues

The Federal National Council (FNC) yesterday approved a law on guaranteeing bank bonds and sukuks until October 2016.

Obaid Humaid Al Tayer, UAE Minister for Financial Affairs, said: "The new law is an important transitional legislative move towards guaranteeing deposits. With it, there is now a legal infrastructure to guarantee deposits, bonds and sukuks."

The law does not apply to branches of foreign banks or foreign financial institutions working in the country, but only to local banks and financial institutions licensed by the UAE Central Bank.

"The Ministry of Finance has the authority to guarantee bonds and sukuks starting from the moment the new law is applied until October 10, 2016.

And the ministry's guarantee will not be active unless it issues a certificate of guarantee. The ministry also has the right to reject or accept a bank's application for the guarantee," said Al Tayer.

The bonds or sukuks need to meet set criteria to receive the guarantee.

It should be a public debt bond and its due time should not exceed five years from the date it was issued or the expiration date of the guarantee. The bond's source should be the bank applying for the guarantee.

The ministry will co-ordinate with the Central Bank to impose certain restrictions on the bank applying for the guarantee during the period of the guarantee's validity.

According to the law, the ministry has a right to ask the Central Bank to extract a fee from any bank from its account at the Central Bank if the bank does not meet its dues on time.

The FNC also approved another law to regulate the country's public revenues.

"This law aims to support the general budget and collect the federal government's fees from all ministries and local departments that are not deposited in the country's treasury," said Al Tayer.

Abdul Aziz Al Ghurair, President of the FNC, promised to reach a collective solution after reaching an agreement on the law.

The FNC was formed under the Provisional Constitution of the UAE in 1971 as a component of the governing structure that includes the Supreme Council, President, Cabinet and Judiciary.

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