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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]
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  • PIB 3 Part 5 — Calculating the Leverage Ratio

    • PIB 3.18 Leverage Ratios

      • PIB 3.18.1

        This section applies to an Authorised FirmG in CategoryG 1, 2 or 5.

        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 3.18.1 Guidance

          This section is relevant to an Authorised FirmG that is required to report its Leverage Ratio to the DFSAG under PIB chapter 2, or to disclose its Leverage Ratio under PIB chapter 11, of these Rules.

          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

      • PIB 3.18.2

        An Authorised FirmG must calculate its Leverage Ratio in accordance with the following formula:

        Leverage Ratio = Capital Measure ÷ Exposure Measure

        where:

        (a) "Capital Measure" represents Tier 1 Capital of the Authorised FirmG calculated in accordance with PIB Rule 3.12.1; and
        (b) "Exposure Measure" represents the value of exposures of the Authorised FirmG calculated in accordance with PIB Rule 3.18.3.
        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.18.3

        For the purpose of determining the Exposure Measure, the value of exposures of an Authorised FirmG must be calculated in accordance with the International Financial Reporting Standards (IFRS) subject to the following adjustments:

        (a) on-balance sheet, non-derivative exposures must be net of specific allowances and valuation adjustments (e.g. credit valuation adjustments);
        (b) physical or financial collateral, guarantees or credit risk mitigation purchased must not be used to reduce on-balance sheet exposures; and
        (c) loans must not be netted with deposits.
        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 3.18.3 Guidance

          1. The following GuidanceG is intended to illustrate how an Authorised FirmG should calculate its Leverage Ratio under this section.
          2. The Exposure Measure under PIB Rule 3.18.3 should be calculated as the sum of:
          a. on-balance sheet items; and
          b. off-balance sheet items.
          3. In relation to on-balance sheet items:
          a. for SFTs, the exposure value should be calculated in accordance with IFRS and the netting requirements referred to in PIB Rule 4.9.14;
          b. for DerivativesG , including credit protection sold, the exposure value should be calculated as the sum of the on-balance sheet value in accordance with IFRS and an add-on for potential future exposure calculated in accordance with Rules PIB A4.6.14 to PIB A4.6.21 of App 4; and
          c. for other on-balance sheet items, the exposure value should be calculated based on their balance sheet values in accordance with PIB Rule 4.9.3.
          4. In relation to off-balance sheet items:
          a. for commitments that are unconditionally cancellable at any time by the Authorised FirmG without prior notice, the exposure value should be the notional amount for the item multiplied by a CCF of 10%; and
          b. for other off-balance sheet items, including:
          i. direct credit substitutes;
          ii. certain transaction-related contingent items;
          iii. short-term self-liquidating trade-related contingent items and commitments to underwrite debt and equity securities;
          iv. note issuance facilities and revolving underwriting facilities;
          v. transactions, other than SFTs, involving the posting of securities held by the Authorised FirmG as collateral;
          vi. asset sales with recourse, where the credit risk remains with the Authorised FirmG ;
          vii. other commitments with certain drawdown;
          viii. any other commitments; and
          ix. unsettled transactions,
          the exposure value should be the notional amount for each of the items multiplied by a CCF of 100%.
          5. For an Islamic Financial InstitutionG , assets corresponding to Unrestricted PSIAsG will fall within the Exposure Measure and, therefore, are considered for the purpose of the Leverage Ratio calculation.
          6. Further GuidanceG about the method for completing forms relating to Leverage Ratios can be found in PRUG .
          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]