Market conduct risk

This publication marks the first in our ongoing Thought Leadership series focused on market conduct and conduct risk. Through this series, we aim to offer valuable insight into the evolving challenges of maintaining ethical conduct and managing conduct risk, assisting businesses in navigating the complexities of a rapidly changing regulatory environment driven by innovative products and an expanding customer base.

Embedding the CBUAE’s requirements is essential for shaping the future of financial services in the region.

Significant progress has been made globally by financial institutions, especially in developed markets where market conduct is ingrained in the financial services culture. In these areas, market conduct influences various aspects of operations, from product development to customer engagement, and is viewed by banks as a fundamental component of their success.

As for financial institutions in the UAE, market conduct remains a relatively new concept. In December 2020, the Central Bank of the UAE (CBUAE) took a crucial step by introducing the Customer Protection Regulation and Standards. With this expansion of its regulatory remit and an increased supervisory focus, the CBUAE has completed reviews of market conduct risk across a number of licensed financial institutions. However, this is just the beginning.

Managing conduct risk not only ensures compliance but also offers strategic benefits such as building customer trust, enhancing resilience and reducing redress costs. Rapidly evolving regulatory changes and shifting customer demands are prompting organizations to rethink their business models. Without effective processes and monitoring, the risks of poor conduct— including reputational damage and financial consequences—are significant.

Devina Sharma
Associate Director
Governance, Risk and Compliance Services
KPMG Lower Gulf
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