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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Rulebook Modules
Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER33/02-19]
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Financial Markets Tribunal

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(1 version)
Dec 9 2012 onwards

PIB 4 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. PIB chapter 4 deals with the prudential requirements relating to the management of Credit RiskG by an Authorised FirmG . Credit RiskG refers to risk of incurring losses due to failure on the part of a borrower or a counterparty to fulfil their obligations in respect of a financial transaction.
2. This chapter aims to ensure that an Authorised FirmG holds sufficient regulatory capital of acceptable quality so that it can absorb unexpected losses arising out of its Credit RiskG exposures, should the need arise and that it continues to operate in a sustainable manner.
3. This chapter requires an Authorised FirmG to:
a. appropriately apply a risk-weight to all on-balance sheet assets and off-balance sheet exposures for capital adequacy purposes. A risk-weight is based on a Credit Quality GradeG aligned with the likelihood of counterparty default;
b. calculate the Credit Risk Capital RequirementG for its on-balance sheet assets and off-balance sheet exposures; and
c. reduce the Credit Risk Capital RequirementG for its on-balance sheet assets and off-balance sheet exposures where the exposure is covered fully or partly by some form of eligible Credit RiskG mitigant.
4. PIB Appendix 4 provides detailed requirements, parameters, calculation methodologies and formulae in respect of the primary requirements outlined in PIB chapter 4.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]