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Dubai Financial Services Authority (DFSA): Contents

Dubai Financial Services Authority (DFSA)
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
Financial Markets Tribunal

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  • PIB A6.1.1

    (1) An Authorised FirmG which uses the Basic Indicator ApproachG must calculate its Operational RiskG Capital RequirementG equal to the average over the previous three years of a fixed percentage (denoted alpha) of positive annual gross income.
    (2) In (1), if the figure for annual gross income in any of the previous three years is zero or negative an Authorised FirmG must exclude such amounts from the calculation of the average.
    (3) The Operational RiskG Capital RequirementG in (1) must be calculated according to the following formula:

    KBIA = [Σ(GI1...n Xα)] / n


    KKIA = the Operational RiskG Capital RequirementG under the Basic Indicator ApproachG

    GI = the gross annual income, where positive, over the previous three years

    n = number of the previous three years for which gross income is positive

    α = 15%,
    (4) For the purpose of (1), "gross income" is net interest income plus net non-interest income and must:
    (a) be gross of any provisions (e.g. for unpaid interest);
    (b) be gross of operating expenses, including fees paid to outsourcing service providers;
    (c) exclude realised profits/losses from the sale of SecuritiesG in the Non-Trading BookG ; and
    (d) exclude extraordinary or irregular items as well as income derived from insurance recoveries.
    Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A6.1.1 Guidance

      1. In PIB A6.1.1(1), the three year average should be calculated on the basis of the last three yearly observations at the end of the Authorised Firm'sG financial year. When audited figures are not available, business estimates may be used.
      2. If an Authorised FirmG does not have sufficient income data to meet the three year requirement (e.g. a start-up), it may use its forecasted gross income projections for all or part of the three year time period. For example, if an Authorised FirmG has two positive yearly gross incomes of USD 20 each and the final yearly observation shows a negative figure of USD 5, then the average should be calculated as USD 20 being USD 40 (sum of positive figures) divided by 2 (number of years for which positive figures are available).
      3. NetG interest income in PIB A6.1.1(4) is the interest income minus interest expense. GuidanceG on what constitutes interest income and interest expense can be found in the PRUG module.
      4. NetG non-interest income in PIB A6.1.1(4) includes the income from fees and commissions, net income from trading SecuritiesG , net income from investment SecuritiesG , income from Islamic contractsG and other operating income minus fee and commission expense. GuidanceG on non-interest income can be found in the PRUG module.
      5. In PIB A6.1.1(4)(ii), outsourcing fees paid by the Authorised FirmG should be excluded whereas any outsourcing fee received by the Authorised FirmG should be included as part of the gross income.
      6. When income from revaluation of trading items is included in the income statement, such revaluation income should be included in the calculation of the gross income.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]