Risk appropriate standards and practice
ADGM will adopt a prudential regulation approach to ensure financial stability, and provide an open and efficient business friendly environment. Companies will be subject to prudential standards and risk assessments, that are based on a defined framework, to identify their level of risk contribution and impact on the marketplace. Institutions will be risk-profiled based on their role in the financial system and, to adhere to requirements proportionate to their role.
Institutions and businesses, operating within the ADGM markets, will be expected to have a proper and thorough risk oversight of their business activities. ADGM will deploy supervisory efforts and allocate necesary resources to maintain the well-being and functioning of the marketplace.
ADGM will take a consolidated approach to the supervision of financial institutions that have multiple business lines or entities within their structures. Various types and degrees of risks can be manifested concurrently during stressful events and crisis. To achieve a more comprehensive and holistic view of risks and their potential impact, ADGM seeks to supervise entities at the parent company level and work closely with other jurisdictions on issues relating to cross-border operations.
The Regulator Authority will undertake financial sector surveillance as part of its supervisory function. This will include trend analysis to identify risks factors such as unsustainable trends over time, unstable patterns of financial exposure or structural weaknesses.
Focus on reducing impact of failure rather than failure altogether
ADGM is responsible for maintaining financial stability in the marketplace. Institutions and firms operating within ADGM’s marketplace will be required to have default rules and procedures that enable them to (i) meet their obligations in the event of a participant default, or stressed situations, and (ii) deal with replenishment of resources following a default. Should a default occur, the Regulatory Authority will work with the relevant UAE authorities to wind down the company in an orderly manner, while maintaining market stability and minimising any potential negative impact on consumers.
In the allocation of internal resources, ADGM will put in place adequate resources to supervise and monitor institutions and firms on their risks contribution.
Safeguarding the best interests of consumers
ADGM will look to its institutions and firms to provide fair and transparent services to their clients. This will enable consumers to better understand the range of service offerings, fee structures and product attributes before making informed decisions.
When there is a breach of its rules and regulations, the Regulatory Authority will take immediate steps to mitigate any immediate risks of market contagion or unfavourable impact on consumers. Details investigations will be conducted and disciplinary actions will be taken where warranted.
Proactive, proportional, predictable & judgement driven interventions
Supervisory intervention is a necessary part of the Regulatory Authority’s toolkit to make certain institutions address emerging external threats or internal weaknesses. In applying any supervisory intervention, ADGM will seek to:
- Help institutions respond early to emerging threats
- Communicate its actions early; work with institutions on agreed measures and actions to take
- Be risk focussed and practical to ensure interventions are constructive rather than punitive
ADGM will make certain that its enforcement actions are effective deterrent against misconduct and imposed fairly and consistently across the market. Where a potential criminal breach is identified, ADGM will refer the case to the relevant UAE authorities for further investigation and actions.