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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
Amendments to Legislation
Media Releases
Notices
Financial Markets Tribunal
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  • Credit Risk Policy

    • PIB 4.4.2

      (1) An Authorised FirmG must implement and maintain a Credit RiskG policy which prescribes all the essential elements of the Credit RiskG management system and associated processes.
      (2) The policy must be:
      (a) documented;
      (b) approved by the Governing BodyG ; and
      (c) regularly reviewed and updated by the Authorised FirmG at periodic intervals and at least annually, as appropriate to the firm's current financial performance, credit market conditions in its main markets and its Capital ResourcesG position as well the firm's nature, scale and complexity of its activities.
      (3) Any changes to the Credit RiskG policy and how exceptions to the policy will be dealt with must be approved by the Governing BodyG or an appropriately delegated committee of senior management (such as a credit committee).
      (4) An Authorised FirmG with one or more branches outside the DIFCG must implement and maintain Credit RiskG policies adapted to each local market and its regulatory conditions.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.3

      The Credit RiskG policy must:

      (a) be consistent with the approved Credit RiskG strategy, considering a range of factors, including but not limited to an approved degree of risk tolerance, capital allocated to Credit RisksG , business strategy and market conditions in its main credit markets;
      (b) provide sound, well-defined Credit RiskG norms and criteria for approval of credit applications;
      (c) clearly specify the ExposureG limits, product types, business segments, nature of target borrowers and the nature of Credit RiskG that the Authorised FirmG wishes to incur;
      (d) set out, where appropriate, the amounts and terms and conditions under which CounterpartiesG or clients may be eligible or ineligible for credit;
      (e) include minimum information that is required to be obtained for processing an application for credit;
      (f) include well defined criteria and policies for approving new ExposuresG as well as renewing and refinancing existing ExposuresG , identifying the appropriate approval authority for the size and complexity of the ExposuresG ;
      (g) include effective credit administration policies, including continued analysis of a borrower's ability and willingness to repay under the terms of the debt, monitoring of documentation, legal covenants, contractual requirements and CollateralG , and a classification system that is consistent with the nature, size and complexity of the Authorised Firm'sG activities or, at the least, with the asset grading system prescribed in PIB Rule 4.5.4;
      (h) include comprehensive policies for reporting ExposuresG on an on-going basis;
      (i) include comprehensive policies for identifying and managing problem assets;
      (j) include a provisioning policy approved by the Governing BodyG which ensures that all loans are promptly and prudently provided for;
      (k) set out limits and approval processes involved for the approval of credit facilities that can be approved by the delegated authorities, and stipulate that the Governing BodyG retains responsibility for the governance of such limits;
      (l) require that major Credit RiskG ExposuresG exceeding a specified amount or at a minimum all Large ExposuresG of the Authorised FirmG are approved by the Authorised Firm'sG senior management or its designated body like credit committee; and
      (m) require that all Credit RiskG ExposuresG that are especially risky or inconsistent with the approved credit strategy of the Authorised FirmG are approved by the Authorised Firm'sG senior management or its designated body such as a credit committee.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.4

      In relation to conflicts of interest and Related PersonG transactions, the policy must:

      (a) set out adequate procedures for handling conflicts of interest relating to the provision and management of credit, including measures to prevent any PersonG directly or indirectly benefiting from the credit being part of the process of granting or managing the credit;
      (b) subject to PIB Rule 4.4.5, prohibit ExposuresG to Related PersonsG on terms that are more favourable than those available to PersonsG who are not Related PersonsG ; and
      (c) if ExposuresG to Related PersonsG are allowed on terms which are no more favourable than those available to PersonsG who are not Related PersonsG , set out procedures that:
      (i) require such ExposuresG , and any write-off of such ExposuresG , exceeding specific amounts or otherwise posing special risks to the Authorised FirmG , to be made subject to the prior written approval of the firm's Governing BodyG or the Governing Body'sG delegate; and
      (ii) exclude PersonsG directly or indirectly benefiting from the grant or write off of such ExposuresG being part of the approval process.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.5

      The prohibition in PIB Rule 4.4.4(b) does not apply to providing credit to a Related PersonG under a credit policy on terms (such as for credit assessment, tenor, interest rates, amortisation schedules and requirements for CollateralG ) that are more favourable than those on which it provides credit to PersonsG who are not Related PersonsG , provided the credit policy:

      (a) is an EmployeeG credit policy that is widely available to EmployeesG of the Authorised FirmG ;
      (b) is approved by the Authorised Firm'sG Governing BodyG or the Governing Body'sG delegate;
      (c) clearly sets out the terms, conditions and limits (both at individual and aggregate levels) on which credit is to be provided to such EmployeesG ; and
      (d) requires adequate mechanisms to ensure on-going compliance with the terms and conditions of that credit policy, including immediate reporting to the Governing BodyG or the Governing Body'sG delegate where there is a deviation from or a breach of the terms and conditions or procedures applicable to the provision of such credit for timely and appropriate action.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.4.5 Guidance

        1. The requirements in these RulesG do not prevent arrangements such as EmployeeG loan schemes that allow more favourable and flexible loan terms to EmployeesG of the Authorised FirmG than those available under its normal commercial arrangements. However, such a loan scheme must comply with the requirements set out in these RulesG , which are designed to address conflicts of interest that may arise in the grant, approval or management of such loans. Such conflicts are especially likely to arise where one or more of the EmployeesG concerned are DirectorsG , PartnersG or senior managers.
        2. Generally, where an Authorised FirmG has an EmployeeG loan scheme under these RulesG , the DFSAG expects its Governing BodyG to have ensured, before it or its delegate approved that scheme, that the terms, conditions and particularly limits (both at individual and aggregate level) on which credit is to be provided to EmployeesG under the scheme are adequate and effective in addressing the risks arising from such lending. The Authorised FirmG should also be able to demonstrate to the DFSAG that the procedures it has adopted relating to an EmployeeG loan scheme are adequate to address any risks arising from such lending. The DFSAG expects to have access to records relating to lending under an EmployeeG loan scheme upon request or during its supervisory visits. Any significant breach of or deviation from the procedures adopted in relation to an EmployeeG loan scheme may also trigger the reporting requirements to the DFSAG under GEN Rule 11.10.7.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.6

      For the purposes of the RulesG in this chapter, a PersonG is a "Related PersonG " of an Authorised FirmG if the PersonG :

      (a) is, or was in the past 2 years:
      (i) a member of a GroupG or PartnershipG in which the Authorised FirmG is or was also a member; or
      (ii) a ControllerG of the Authorised FirmG or a Close RelativeG of such a ControllerG ;
      (b) is, or was in the past 2 years, a DirectorG , PartnerG or senior manager of the Authorised FirmG or an entity referred to under (a)(i) or (ii), or a Close RelativeG of such a DirectorG , PartnerG or senior manager; or
      (c) is an entity in which a DirectorG , PartnerG or senior manager of the Authorised FirmG or an entity referred to in (a)(i) or (a)(ii), or a Close RelativeG of such a DirectorG , PartnerG or senior manager has a significant interest by:
      (i) holding 20% or more of the shares of that entity, or a ParentG of that entity, if that entity is a company; or
      (ii) being entitled to exercise 20% or more of the voting rights in respect of that entity;
      except that a PartnerG is not a Related PersonG where that PersonG is a limited partner of a Limited PartnershipG formed under the Limited PartnershipG Law of 2006 or any similar limited partnership constituted under the law of a country or territory outside the DIFCG .
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]