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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
Archive

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  • PIB 7.3.1

    In order to meet effectively the obligations specified under PIB chapter 10, which includes the need to address Non-Trading BookG interest rate risk, an Authorised FirmG is required to make a written record of its assessments made under Rules specified in PIB chapter 10.

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

    • PIB 7.3.1 Guidance

      1. This PIB chapter 7 does not impose an explicit Capital RequirementG relating to interest rate risk. Rather, the DFSAG may impose an Individual Capital RequirementG (ICR) under PIB chapter 10 where it is of the view that the Authorised Firm'sG Capital RequirementG is insufficient to address adequately all its risks, and in particular its ExposureG to interest rate risk in the Non-Trading BookG .
      2. Sections PIB 10.3 and PIB 10.4 of PIB chapter 10 require an Authorised FirmG to submit IRAPG and ICAAPG assessments to the DFSAG within 4 months of the end of the firm's financial year. The provisions also require the firm to ensure the assessments are documented in writing and to retain the records for at least 6 years.
      3. An Authorised Firm'sG record of its approach to evaluating and managing interest rate risk in its Non-Trading BookG , as part of its ICAAPG should cover the following issues:
      a. the internal definition of, and boundary between, "Non-Trading BookG " and "trading activities" in accordance with PIB chapter 2 and PIB App2;
      b. the definition of economic value and its consistency with the method used to value assets and liabilities (e.g. discounted cashflows);
      c. the size and the form of the different shocks to be used for internal calculations;
      d. the use of a dynamic and / or static approach in the application of interest rate shocks;
      e. the treatment of commonly called "pipeline transactions" (including any related hedging);
      f. the aggregation of multi-currency interest rate ExposuresG ;
      g. the inclusion (or not) of non-interest bearing assets and liabilities (including capital and reserves);
      h. the treatment of current and savings accounts (i.e. the maturity attached to ExposuresG without a contractual maturity);
      i. the treatment of fixed rate assets (liabilities) where customers still have a right to repay (withdraw) early;
      j. the extent to which sensitivities to small shocks can be scaled up on a linear basis without material loss of accuracy (i.e. covering both convexity generally and the non-linearity of pay-off associated with explicit option products);
      k. the degree of granularity employed (for example, offsets within a time bucket); and
      l. whether all future cash flows or only principal balances are included.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]