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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER33/02-19]
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(1 version)
 
Jan 1 2015 onwards

PIB A9.2 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. The objective of the LCR is to promote short-term resilience of an Authorised Firm'sG liquidity risk profile. The LCR aims to ensure that an Authorised FirmG maintains an adequate level of unencumbered HQLA that can be converted into cash to meet its liquidity needs for a 30 calendar day period under a severe liquidity stress scenario.
2. The LCR is calculated under PIB Rule 9.3.5 using the following formula:

LCR = Value of stock of HQLA / Total Net Cash Outflows over the next 30 calendar days
3. The LCR has two components:
a. Value of the stock of HQLA in stressed conditions; and
b. Total Net Cash Outflows, calculated according to the scenario parameters outlined in this section.
4. The stress scenario entails both institution-specific and systemic shocks including:
a. the run-off of a proportion of retail deposits;
b. a partial loss of unsecured wholesale funding capacity;
c. a partial loss of secured, short-term financing with certain collateral and counterparties;
d. additional contractual outflows that would arise from a downgrade in the Authorised Firm'sG public credit rating, where applicable, by up to and including three notches, including collateral posting requirements;
e. increases in market volatility that affect the quality of collateral or potential future exposure of derivative positions and so require larger collateral haircuts or additional collateral, or lead to other liquidity needs;
f. unscheduled draws on committed but unused credit and liquidity facilities that the Authorised FirmG has provided to its clients; and
g. the potential need for the Authorised FirmG to buy back debt or honour non-contractual obligations to mitigate reputational risk.
[Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]