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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Recognised Jurisdictions and Funds
Declaration Notices
Financial Markets Tribunal
Rulebook Modules
Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER34/12-19]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases

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(2 versions)
Dec 9 2012 - Aug 20 2014Aug 21 2014 onwards

PIB A10.3 Guidance

Whole Section PDF

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. This GuidanceG is relevant to an Authorised FirmG as described in PIB section 10.5 (that is, a firm in CategoryG 1, 2, 3A, 3B, 3C or 5) in regard to a Supervisory Review and Evaluation ProcessG (referred to in this GuidanceG as a SREPG ).


2. This GuidanceG covers the evaluation criteria and methodology (referred to as a SREPG ) that the DFSAG may use when reviewing and evaluating the IRAPG and ICAAPG of an Authorised FirmG .

The SREPG in detail

3. A SREPG of an IRAPG and an ICAAPG forms an integral part of the overall supervisory approach of the DFSAG . A SREPG is expected to enable assessment of the effectiveness, completeness and quality of an IRAPG and ICAAPG in relation to the overall risk profile of the Authorised FirmG . It leverages from information collected and assessments carried out as part of the wider supervisory regime, including desk-based reviews, on-site risk assessments, discussions with the firm's management, and reviews completed by internal and external auditors.
4. The SREPG is structured to provide consistency of treatment across Authorised FirmsG , taking into consideration the differences in risk profiles, business strategies and management. An essential element of the SREPG is the qualitative assessment of each type of risk and its management within the overall context of the firm's internal governance.
5. The DFSA'sG assessment of the individual risk profile of an Authorised FirmG will provide the context for evaluation of the firm's IRAPG and/or ICAAPG . The evaluation in turn will be used by the DFSAG to augment its understanding of the overall risk profile of a firm. Also, in relation to a firm in CategoryG 1, 2, 3A or 5, the DFSAG might involve such a firm in a formalised discussion of risks and capital adequacy, which might lead to a requirement for additional capital.
6. The SREPG may be used as a regulatory tool for Authorised FirmsG which are required to perform an IRAPG and/or ICAAPG . The SREPG for each Authorised FirmG will be proportionate in terms of the size, scale and complexity of its business and its impact on financial sector stability. The DFSAG will cooperate actively with other supervisory authorities whenever an Authorised FirmG is part of a GroupG and is prudentially regulated on a consolidated basis.
7. The SREPG evaluation cycle will be determined in the discretion of the DFSAG and be based on the risk assessment, developments in the risk profile and changes in the Authorised Firm'sG strategy or products. The SREPG is as far as possible aligned with the risk assessment process to ensure that a recent risk assessment is available for the SREPG evaluation process.
8. It is envisaged that the DFSAG will use a range of supervisory tools of qualitative or quantitative nature to perform the SREPG . The SREPG is not intended as, and should not constitute, a parallel or secondary IRAPG or ICAAPG . Its purpose is to evaluate the quality, completeness and consistency of the IRAPG or ICAAPG of the Authorised FirmG .

Review of the IRAPG and ICAAPG Assessment

9. Upon receipt of an IRAPG or ICAAPG the DFSAG would normally:
a. subject the data provided to an initial analysis for completeness and accuracy followed by a more detailed comparison with the relevant data held on file at the DFSAG about the Authorised FirmG ;
b. determine if there are material changes compared with previous submissions;
c. determine if the submitted data contains indicators of a possible material change in the firm's risk profile;
d. address and discuss any information gaps or anomalies with the firm; and
e. form an assessment about content and quality of the submission which will be integrated into the overall supervisory approach.

Evaluation of the IRAPG and ICAAPG

10. The SREPG evaluation of the IRAPG and, where applicable, the ICAAPG covers all activities of an Authorised FirmG and takes all relevant data collected during the supervisory process into account. The SREPG evaluation process will use desk based reviews, firm visits and meetings to arrive at a final view.
11. As part of the SREPG , the DFSAG will consider:
a. the completeness of the IRAPG and, where applicable, the ICAAPG by ensuring that it covers all business areas, internal governance and all risk categories of the Authorised FirmG ;
b. the soundness and quality of the IRAPG and, where applicable, the ICAAPG process in relation to the firm's size, business complexity and risk profile;
c. soundness of qualitative calibration and quantitative methodology whenever employed by the firm;
d. execution of the IRAPG and, where applicable, the ICAAPG in terms of consistency, quality and documentation;
e. adequacy of internal controls and quality assurance processes on the IRAPG and, where applicable, the ICAAPG ; and
f. adequacy of management information and whether the management had responded adequately and in a timely manner to such information.
12. Based on the SREPG , the DFSAG will form an assessment which will be communicated to the Authorised FirmG and flow into the overall supervisory approach. The action required resulting from the IRAPG and ICAAPG will be communicated to the firm as part of a risk mitigation programme.
13. In relation to an Authorised FirmG in CategoryG 1, 2, 3A or 5, where the DFSAG does not agree with the results of the firm's ICAAPG results, the DFSAG will involve the firm in a dialogue to reconcile any difference in view to arrive at a consensus estimate of the capital level required to address all risks identified either by the firm or by the DFSAG in its SREPG . Such an estimate will be specified by the DFSAG as the Individual Capital RequirementG for the firm. Where consensus is not possible the DFSAG may impose an Individual Capital RequirementG on a firm.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
[Amended] DFSA RM135/2014 (Made 21st August 2014). [VER22/06-14]