"Even though the UAE did not have its own currency forty years ago, and issued its first currencyin 1973, it is known as a global financial hub in the present world housing the leading financialcenter in the Middle East. It can be noted that the development of the financial service industry25 in the UAE goes hand in hand with the evolution of Dubai – the trading hub for the region.With the evolutionary growth in the financial sector in a high speed it is easy to forget this fortyyears of journey of the UAE financial service industry and also the creation of the UAE?s FirstCurrency Board on May 9, 1973. The current section discusses in detail this forgotten journey offorty years of the UAE banking sector.The creation of the UAE in 1973 lead to the establishment of the currency board that issued thefirst national currency which replaced the then used currencies the Bahraini Dinar and the Qatari26 and Dubai Riyal. The UAE currency UAE dirham came into circulation the day it launched andother currencies were phased out in few weeks.Before the outbreak of the civil war in 1975, Lebanon was the financial hub of the Middle Eastand held the title of the financial hub, however after the civil war most of the banking institutionsrelocated to Bahrain. Most of the international banks had already moved to Bahrain during theTrucial States period before the civil war. Forty years ago banking transaction for the companiesin the UAE were a far simpler affair. The Standard Chartered set its operations in 1958, with itsfirst branch in Sharjah. Latter, the British Bank of the Middle East was taken over by the HSBCwhich had branches all over Abu Dhabi in 1959 and continued using the name till 1999. Apartfrom these international banks many other local banks were operating in the UAE. The Nationalintermediaries is to channel funds from lenders to borrowers by intermediating between them. (Source:https://stats.oecd.org/glossary/detail.asp?ID=972)25Same as note 1626“Central Bank of United Arab Emirates”; http://www.centralbank.ae/en/index.php?option=com_content&view=article&id=148&Itemid=106Bank of Dubai known as the oldest bank of the southern gulf was launched in the year 1963.Since 1968 the National Bank of Abu Dhabi has been operating in the UAE.Nevertheless the growth of the country?s economy alerted the financial sector the need of a27 strictly regulated and fully fledged Central Bank. Herd Bay-Frauke in her book stated that thecurrency board of 1973 was found to lack a systematic and structural approach to the growingeconomic needs of the nation. It lacked proper authority to regulate the increasingly complicateddifferent monetary scenes as a result of the quadrupling of the oil price in the year 1974. Furthershe opined that this lack of authority led to need of a regulatory authority to stabilize thecomplicate monetary scenes which led to increase in the number of the foreign and local banks in28 the nations.To overcome all the complications, on December 10, 1980 the Currency Board of the UAEbecame the Central Bank of the UAE. The nation felt for the need of such change in the view ofhuge economic and financial development that coincided with the establishment of the nationalbanks 21 banks then and with the circulation of the currency reaching the UAE dirham of 1billion as of December 31, 1980.The formation of the Central Bank in the UAE was considered 0a revolutionary step and theinstitute became most powerful and responsible for organizing the country?s monetary, banking29 and credit policies and also for maintaining currency reserves in gold and the nation?s currency.27Herd Bay-Frauke, “From Trucial States to United Arab Emirates: A Society in Transition,” 200428Same as above29Same as note 16 LEGAL REGULATIONS OF THE BANKING SECTOR IN UAEThe banking sector in the UAE falls under five important categories:commercial, merchant orinvestment, financial and monetary intermediaries, financial institutions and representativeseach of which must compulsorily be licensed by the Central Bank. The foreign banks in the UAEshould also be licensed by the Central Bank and the banks have the limitation of opening only 8branches and typically the operation of these banks takes the form of a branch. Foreign banks areallowed into the financial sector of the UAE and the subsidiaries of the foreign banks are notallowed. However, the foreign banks are given the opportunity to open representative offices.The Foreign Banks receive national treatment only for the paid-up capital requirements.Governance of banks has been on the agenda and continues to be on the agenda of manyregulators around the world. The principle legal regulations and governmental policies governingthe banking and financial institution of the UAE are the UAE Federal Law No. 10 of 1980concerning the Central Bank, the Monetary System and the Organization of Banking (the30 31 Banking Law), the UAE Federal Law No. 18 of 1993, as amended (the Commercial Code),the UAE Federal Law No. 6 of 1985 concerning Islamic banks, financial establishments and32 investment companies (Islamic Banking Law) and a variety of notices, circulars and resolutionsthat have been issued by the UAE Central Bank board of governors from time to time. Afternoting the different regulatory and government policies governing banking sector the dissertation33 further summarizes in detail these primary statues and regulations.The regulatory framework for the UAE began with the Federal Law No. 10 of 1980, concerningthe Central Bank, the Monetary System and Organization of Banking (the Banking Law) in the30http://www.centralbank.ae/en/pdf/Law-10-English.pdf31https://legaladviceme.com/legislation/127/uae-federal-law-18-of-1993-issuing-commercial-transactions-law32http://www.centralbank.ae/pdf/LawNo6-1985-IslaminBanks.pdf33Putnis Jan, “The Banking Regulation Review,” Sixth Edition, Law Business Research Ltd; http://afridi-angell.com/items/limg/c_180TLR%20- %20The%20Banking%20Regulation%20Review%202015%20UAE.pdf UAE formed the Central Bank and provided the Bank with the authority to monitor andorganizes the banking sector in the UAE. This was a prime financial regulatory authorityimplemented by the government of the UAE to improve the banking system of the nation as it isthe back bone of the country?s economic structure. It is also considered as the backbone of theconventional banking sector in the UAE including the Islamic banks. The authority of theCentral Bank include organizing the monetary credits and the bank policies of the nationAs perthe banking law the Central Bank was established and entrusted with the authority to issue andmanage the Nation?s currency and to regulate the banking and financial. In Addition to the abovestated authorities, the Central Bank implementation include issuance of the currency according tothe current law, maintaining the stability as well as the convertibility of the currency into foreigncurrency and acting as bank of banks and the financial advisor of the government among othermatters. According to the Banking Law the Central Bank has the authority to license and regulatethe (1) Commercial Banks, (2) Investment Banks and Companies, (3) Islamic Banks, (4)Financial Intermediaries, (5) Finance Companies, (6) Monetary Intermediaries, (7)Representative Offices, and (8) Real Estate Banks and Finance Companies. Thus, from the aboveit can be understood that the Central Bank of the UAE had the supreme authority of regulatingbanks and it is this bank that plays a vital role in regulating even the establishment or working ofthe foreign banks as explained in the further parts of the dissertation.The creation of the Central bank did bring in a greater change in the economy of the nation. Thebank which was also authorized to handle all the state transactions, the Central Bank evolvedefficiently to the needs of the expanding economy. This bank is the primary regulatory authorityfor overseeing the banking sector in the UAE except for the institutions mentioned above. Additionally, the bank does not supervision authority even on the Dubai International Financial34 Centre, which is regulated by the Dubai Financial Services Authority. The currency in the UAE is pegged to the US dollar that is the main reason that the Central Bankthat had been formed to take over the responsibilities of the currency board had very limited roleto play in the monetary policies and also setting the rate of interest. However, it can observedthat some of the monetary and credit controls of the bank are exercised through its purchase andsale of the certificate deposits. The Central Bank of the UAE plays a major role in monitoringand formulating the credit policy and also in supervising the financial sector of the nation. The UAE Federal Law No. 18 of 1993, as amended (commercial code) regulation that provides adetail provisions on various banking operations including provisions for governing the bankingdeposits, bank accounts, guarantees, bill of exchange, cheques, documentary credits, promissorynotes, and loans. The commercial banks formed in the UAE were licensed under the UAECentral Bank and thus, are subject to the regulations and requirements of the Central Bank. TheCentral Bank in the year1998 instructed all the banks to compulsorily use the IAS and latter inthe earlier 1999 the local banks in the UAE were instructed to create a clear corporate structure.Pursuant to the regulations of the Central Bank of the UAE, the majority in all the UAE banksmust be owned by the UAE nationals only.The UAE Federal Law No. 6 of 1985 concerning Islamic banks, financial establishments andinvestment companies (Islamic Banking law) regulates provisions relating to establishment andoperation of an Islamic Bank in the UAE. The Islamic Banks should also abide by the BankingLaw regulation but with certain exemptions. This regulation legalized the Islamic banks in theUAE which constitute a small component of the UAE banking sector. Pursuant to the Islamic34Same as Note 2 "