CISI UAE FRR UAE Financial Regulation Framework 4 — Questions and Answers
Question 1: Which prudential ratio measures a bank's long-term stable funding relative to its required stable funding?
- Net Stable Funding Ratio (NSFR) (Correct answer)
- Liquidity Coverage Ratio (LCR)
- Common Equity Tier 1 (CET1) ratio
- Loan-to-Deposit Ratio (LDR)
Correct answer: Net Stable Funding Ratio (NSFR)
The NSFR ensures banks maintain a stable funding profile over a one-year horizon, requiring available stable funding to exceed required stable funding to reduce liquidity risk.
Question 2: The UAE's regulatory framework for payment service providers is governed by:
- CBUAE Retail Payment Services and Card Schemes Regulation (Correct answer)
- DIFC Payment Services Law
- SCA Payment Regulation
- Ministry of Finance Payment Circular
Correct answer: CBUAE Retail Payment Services and Card Schemes Regulation
The CBUAE's Retail Payment Services and Card Schemes Regulation (2021) governs payment service providers, electronic money institutions, and card schemes operating in the UAE.
Question 3: A 'fit and proper' assessment in UAE financial regulation evaluates:
- The competence, integrity, and financial soundness of key individuals (Correct answer)
- The technology infrastructure of a financial firm
- The market share held by a licensed institution
- The credit ratings of a bank's loan portfolio
Correct answer: The competence, integrity, and financial soundness of key individuals
Fit and proper assessments evaluate whether individuals in controlled functions (directors, senior managers) have the necessary competence, honesty, integrity, and financial soundness to perform their roles.
Question 4: Under UAE regulations, what is the mandatory reporting timeframe for a suspicious transaction report (STR)?
- As soon as practicable, without delay (Correct answer)
- Within 30 business days
- Within 6 months
- Annual reporting only
Correct answer: As soon as practicable, without delay
UAE AML regulations require financial institutions to file STRs with the UAEFIU as soon as they suspect a transaction is related to money laundering or terrorism financing, without any undue delay.
Question 5: Which concept requires UAE financial institutions to understand the ultimate beneficial owner of a legal entity?
- Ultimate Beneficial Ownership (UBO) identification (Correct answer)
- Know Your Transaction (KYT)
- Enhanced Due Diligence (EDD)
- Transaction Monitoring (TM)
Correct answer: Ultimate Beneficial Ownership (UBO) identification
UBO identification requires financial institutions to identify and verify the natural person(s) who ultimately own or control a legal entity, typically those holding 25% or more ownership.
Question 6: The UAE's prudential regulations require banks to maintain a minimum Common Equity Tier 1 (CET1) ratio of:
- 7% (including capital conservation buffer) (Correct answer)
- 4.5%
- 10%
- 2%
Correct answer: 7% (including capital conservation buffer)
Under Basel III as implemented by the CBUAE, banks must maintain a CET1 ratio of at least 4.5% plus a 2.5% capital conservation buffer, totalling 7% minimum CET1.
CISI UAE FRR UAE Financial Regulation Framework 4
Which prudential ratio measures a bank's long-term stable funding relative to its required stable funding?