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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Rulebook Modules
Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER33/02-19]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
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Financial Markets Tribunal
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  Versions
(1 version)
 
Dec 9 2012 onwards

PIB 4.13.9

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The definitive version of DFSA handbook text is the PDF version as that is the text of the instrument as made and published by the DFSA.

To view past versions of this module in PDF format, please visit the Archive.

(1) An Authorised FirmG may recognise the effects of Credit RiskG mitigation of a guarantee only if it is provided by any of the following entities:
(a) central government or Central BankG ;
(b) MDB referred to in PIB Rule 4.12.8
(c) International Organisations referred to in PIB Rule 4.12.9;
(d) PSE;
(e) banks and securities firms which qualify for inclusion in bank asset class; or
(f) any other entity that has a Credit Quality GradeG "3" or above.
(2) An Authorised FirmG must not recognise the effects of Credit RiskG mitigation of a guarantee unless all of the following requirements are complied with:
(a) the guarantee is an explicitly documented obligation assumed by the guarantor;
(b) the guarantee represents a direct claim on the guarantor;
(c) the extent of the credit protection cover is clearly defined and incontrovertible;
(d) other than in the event of non-payment by the Authorised FirmG of money due in respect of the guarantee if applicable, there is an irrevocable obligation on the part of the guarantor to pay out a predetermined amount upon the occurrence of a credit event, as defined under the guarantee;
(e) the guarantee does not contain any clause, the fulfilment of which is outside the direct control of the Authorised FirmG , that:
(i) would allow the guarantor to cancel the guarantee unilaterally;
(ii) would increase the effective cost of the guarantee as a result of deteriorating credit quality of the underlying ExposureG ;
(iii) could prevent the guarantor from being obliged to pay out in a timely manner in the event that the underlying obligor fails to make any payment due; or
(iv) could allow the maturity of the guarantee agreed ex-ante to be reduced ex-post by the guarantor;
(f) the Authorised FirmG is able in a timely manner to pursue the guarantor for any monies outstanding under the documentation governing the transaction on the default of, or non-payment by, the underlying obligor without first having to take legal action to pursue the underlying obligor for payment; and
(g) the guarantee covers all types of payments that the underlying obligor is expected to make under the documentation governing the transaction, except in the case of accrued interest, accrued expenses or fees outstanding, where these are deemed immaterial.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]