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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]
PIB App4 Credit Risk
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Financial Markets Tribunal

Whole SectionText only Print Print Manager Link

(1 version)
Dec 9 2012 onwards

PIB A4.6 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. Where settlement does not occur on the due date and neither party has released the relevant cash or SecuritiesG , an Authorised FirmG faces Market RiskG , namely the differential between the contract price of the SecuritiesG and their current value in the market. In this case an Authorised FirmG also faces a Credit RiskG ExposureG for the Unsettled TransactionG , for which the Authorised FirmG is required to hold regulatory capital. The relevant Credit RiskG ExposureG should be included in the calculation of Credit RWAG for the Authorised FirmG .
2. An Authorised FirmG is at risk for the whole amount of the contract (as well as any further movement in price) if it has delivered its leg of a contract before receipt of the other leg. In this case an Authorised FirmG must calculate the Credit RiskG RWAG for the free delivery transaction.
3. For OTC DerivativesG and other contracts, an Authorised FirmG is exposed to settlement risk. For an OTC DerivativeG contract, the risk is that the price moves in an Authorised Firm'sG favour so that it makes a book profit but at maturity the Authorised FirmG cannot realise that profit because the other party defaults. The amount at risk is therefore less than the Authorised FirmG 's nominal ExposureG and is measured by calculating the proportion of the nominal ExposureG considered to be at risk -the Credit Equivalent AmountG .
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]