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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]
PIB 4 Credit Risk
PIB 4 Part 3 — CRDOM
PIB 4.14 Securitisation
Operational Requirements for Use of External Credit Assessments
Sourcebook Modules
Consultation Papers
Policy Statements
DFSA Codes of Practice
Amendments to Legislation
Media Releases
Notices
Financial Markets Tribunal
Archive

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  • Operational Requirements for Use of External Credit Assessments

    • PIB 4.14.20

      The external credit assessment used for determining the applicable risk weight for a CR ExposureG must be determined by taking into account the entire amount of Credit RiskG (principal and interest) an Authorised FirmG is exposed to.

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

    • PIB 4.14.21

      Credit assessments can only be considered from an ECAIG , and must meet the following criteria:

      (a) any credit assessments used for the purposes of risk weighting must be publicly available;
      (b) the external credit rating agencies must have expertise and market acceptance in rating securitisations of the nature being used for risk weighting purposes;
      (c) Authorised FirmsG must apply external credit rating agency ratings consistently to all tranches of securitisations;
      (d) where an ExposureG has two ratings from external credit rating agencies the less favourable rating must be used; and
      (e) where an ExposureG has more than two assessments by external credit rating agencies the two most favourable ratings can be selected, the review of these assessments is then determined in line with (d).
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.14.22

      Where any Credit RiskG mitigation has been considered as part of any rating applied to a tranche of a securitisation, the risk weighting should be used and no additional capital recognition is permitted.

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

    • PIB 4.14.23

      An Authorised FirmG must treat any securitisation ExposureG as an unrated ExposureG where:

      (a) the external credit assessment incorporates the credit protection provided directly to the SPE by a protection provider which is not an eligible protection provider;
      (b) the external credit assessment is at least partly based on unfunded support provided by the Authorised FirmG itself (e.g. if an Authorised FirmG buys ABCPG ) where it provides an unfunded securitisation ExposureG extended to the ABCP ProgrammeG , such as a liquidity facility or Credit EnhancementG , and that ExposureG plays a role in determining the credit assessment on the ABCPG , the Authorised FirmG must treat the ABCPG as if it were not rated and continue to hold capital against the other securitisation ExposuresG it provides);
      (c) the Credit RiskG mitigant is not obtained by the SPE but is separately obtained and applied to a specific securitisation ExposureG (e.g. a particular tranche); or
      (d) the Credit RiskG mitigation does not meet the eligibility criteria for mitigation specified in PIB section 4.13.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.14.24

      Where Credit RiskG mitigation is applied to a specific ExposureG within a securitisation the Authorised FirmG must treat the ExposureG as unrated, and then use the mitigation as set out in PIB section 4.13 should the RulesG contained in that section apply.

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

    • PIB 4.14.25

      An Authorised FirmG must not use an external credit rating agency rating for risk weighting purposes where the assessment is at least partly based on unfunded support provided by the Authorised FirmG itself.

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

    • PIB 4.14.26

      The treatment outlined in PIB Rule 4.14.24 also applies to ExposuresG in the Authorised Firm'sG Trading BookG . An Authorised Firm'sG Capital RequirementG for such ExposuresG held in the Trading BookG can be no less than the amount required under the Non-Trading BookG .

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