DUBAI  - United Arab Emirates' (UAE) central bank said on Saturday it is closely following recent job cuts in the financial sector, after banks in the country shed hundreds of jobs in the last few months.

"We are closely following the recent occurrences of downsizing amongst financial institutions in the country to ensure that downsizing is not adversely affecting regulatory compliance and market conduct," the Central Bank of the UAE said in a statement.

The statement came as banks accelerate job cuts due to mergers, a sluggish economic environment and a reduction in branches as banks encourage more online banking.

Dubai Islamic Bank (DIB) is planning to axe more than 500 jobs at newly acquired Noor Bank as part of cost cuts across both lenders, Reuters reported on Feb 2, citing sources.

Last year Emirates NBD, HSBC and Abu Dhabi Commercial Bank - which led a merger with two other banks - cut hundreds of jobs.

The UAE central bank also said Saturday it is encouraging "Emiratisation" in the banking sector - hiring of UAE citizens - obliging banks to have 40% Emirati citizens in the workforce within 3 years.

(Reporting by Davide Barbuscia and Saeed Azhar; Editing by Kim Coghill) ((Saeed.Azhar@thomsonreuters.com; +971 44536787; Reuters Messaging: saeed.azhar.reuters.com@reuters.net))