Jan 15 2011 |
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Central bank loses to bank board member
By By Staff Supreme court says central bank has no authority on banks' boardsAfter losing an appeal court case, the central bank resorted to the federal supreme court (FSC) to support its decision in rejecting the nomination of a board member in a bank although that member controls over a quarter of the bank's shares, the Arabic language daily Emirat Alyoum reported on Friday.
But the FSC supported the appeal verdict and overturned the central bank's decision on the ground it has no authority to reject or support the appointment of board members in banks operating in the UAE.
The paper said he won the appeal case, prompting the central bank to resort to the FSC, which supported the appeal sentence in favour of the board member.
"But the FSC rejected the central bank's appeal against the board member....it explained that while the central bank's role is to supervise the financial sector and ensure a sound banking system, it does not extend to include intervention in appointment of board members in banks and investment establishments...it said the central bank does not have the authority to approve or reject appointments in board members of those institutions since these appointments are based on the number of shares owned by those board members."
The FSC said the federal law gives powers to the central bank to intervene only in the nominations of chief executives, general managers, heads of credit and auditing departments and directors of treasury.
"In its sentence, the FSC concluded that the central bank has no authority to monitor or interfere in the appointment of that board member since he owns more than 27 per cent of the bank's shares....the plaintiff was also a board member and only wanted to be renamed after his term expired," the paper said.
© Emirates 24|7 2011
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Comments By Our Users (1)
This is an important precedent in establishing the lines of regulation. While I have no opinion about the merits of the case and neither agree nor disagree with the decision because I don't know enough, I think it is very good that courts are establishing clear rulings about where the limits of regulation are in a general sense, because this will be give private investors and agents a clear sense of the regulatory environment and that in turn will support further investment and other economic activity.
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