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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
Laws
Recognised Jurisdictions and Funds
Declaration Notices
Financial Markets Tribunal
Archive
Rulebook Modules
Prudential — Investment, Insurance Intermediation and Banking Module (PIB) [VER34/12-19]
PIB 4 Credit Risk
PIB 4 Part 3 — CRDOM
PIB 4.14 Securitisation
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices

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  • Systems and Controls for the Use of Securitisations

    • PIB 4.14.3

      An Authorised FirmG must implement and maintain appropriate risk management systems to identify, manage, monitor and, where applicable, control all risks in relation to a securitisation transaction whether the firm is an investor, OriginatorG or SponsorG . In particular, such risk management systems should effectively address the following risks:

      (a) the liquidity and capital implications that may arise from the items returning to the balance sheet;
      (b) the Operational RisksG that may arise under a securitisation; and
      (c) reputational risks that may arise as a result of its securitisation activities.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.14.4

      An Authorised FirmG must have appropriate policies and procedures to ensure that the economic substance of the transaction is fully reflected in the process of managing the risks arising from such transactions. An Authorised FirmG must have appropriate policies and procedures in place to document its systems and controls in relation to securitisation risks. These policies should include details on the capital effects of the securitisation as set out in this chapter.

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.14.5

      An Authorised FirmG must conduct periodic stress tests in relation to its securitisation activities and off balance sheet ExposuresG , including testing of future ability to transact securitisation as a means of Credit RiskG mitigation or for liquidity purposes.

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.14.5 Guidance

        1. The periodic stress testing in relation to securitisation activities referred to in PIB Rule 4.14.5 should consider the firm-wide impact of those activities and ExposuresG in stressed market conditions and the implications for other sources of risk. Such stress tests should include both existing securitisation ExposuresG and transactions in the pipeline, as there is a risk of the pipeline transactions not being completed in a stressed market scenario.
        2. The frequency and extent of stress testing to fulfil the requirements of PIB Rule 4.14.5 should be determined on the basis of the materiality of the Authorised Firm'sG securitisation volumes and its off-balance sheet ExposuresG .
        3. An Authorised FirmG should have procedures in place to assess and respond to the results produced from the stress testing and these should be taken into account under the ICAAPG .
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.14.6

      In order to qualify for using the RulesG specified in this section, and particularly the risk weighting approach outlined below, an Authorised FirmG must demonstrate the following:

      (a) a comprehensive understanding of the risk characteristics of its individual securitisation ExposuresG , whether on balance sheet or off balance sheet, as well as the risk characteristics of the pools underlying securitisation ExposuresG ;
      (b) ability to access the performance information on the underlying pools on an on-going basis in a timely manner; and
      (c) a thorough understanding of all structural features of a securitisation transaction that would materially impact the performance of the Authorised Firm'sG ExposureG to the transaction, such as waterfall triggers, Credit EnhancementsG , liquidity enhancements, market value triggers and deal specific definitions of default.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.14.6 Guidance

        1. An Authorised FirmG which is an investor, OriginatorG or SponsorG of a SecuritisationG should fully understand the risks it has assumed in order to ensure that it can accurately determine the Capital RequirementsG for the ExposuresG arising from the securitisation in accordance with the RulesG in this section.
        2. For the purposes of PIB Rule 4.14.6(b) information should include the percentage of loans 30,60, 90 days past due, default rates, prepayment rates, loans in foreclosure, property type, occupancy, average credit score etc. For Re-securitisationsG , Authorised FirmsG should have information relating to not only the underlying securitisation transactions but also the characteristics and performance of the underlying pools of such transactions.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.14.7

      Where an Authorised FirmG is either an OriginatorG or a SponsorG of a Traditional SecuritisationG or a Synthetic SecuritisationG :

      (a) the Authorised FirmG intending to conduct the securitisation must notify the DFSAG at least 30 days in advance of the proposed execution of the securitisation;
      (b) the Authorised FirmG conducting the securitisation must calculate its Credit RWAsG for all resultant ExposuresG from that securitisation, in accordance with PIB section 4.8, provided the requirements of this section are met; and
      (c) the Authorised FirmG conducting the securitisation must produce documentation reflecting the execution and economic substance of the transaction.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.14.7 Guidance

        The notification made to the DFSAG under (a) should include, inter alia, amounts of assets subject to securitisation, amounts retained, details of securitisation including legal structure, rating, tranches, details of legal transfer and any Credit RiskG mitigation applied and implications on the capital and liquidity position on the Authorised FirmG .

        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]