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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
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Notices
Financial Markets Tribunal
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  • Credit Risk Policy

    • PIB 4.4.2

      (1) An Authorised Firm must implement and maintain a Credit Risk policy which prescribes all the essential elements of the Credit Risk management system and associated processes.
      (2) The policy must be:
      (a) documented;
      (b) approved by the Governing Body; and
      (c) regularly reviewed and updated by the Authorised Firm at periodic intervals and at least annually, as appropriate to the firm's current financial performance, credit market conditions in its main markets and its Capital Resources position as well the firm's nature, scale and complexity of its activities.
      (3) Any changes to the Credit Risk policy and how exceptions to the policy will be dealt with must be approved by the Governing Body or an appropriately delegated committee of senior management (such as a credit committee).
      (4) An Authorised Firm with one or more branches outside the DIFC must implement and maintain Credit Risk policies adapted to each local market and its regulatory conditions.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.3

      The Credit Risk policy must:

      (a) be consistent with the approved Credit Risk strategy, considering a range of factors, including but not limited to an approved degree of risk tolerance, capital allocated to Credit Risks, business strategy and market conditions in its main credit markets;
      (b) provide sound, well-defined Credit Risk norms and criteria for approval of credit applications;
      (c) clearly specify the Exposure limits, product types, business segments, nature of target borrowers and the nature of Credit Risk that the Authorised Firm wishes to incur;
      (d) set out, where appropriate, the amounts and terms and conditions under which Counterparties or clients may be eligible or ineligible for credit;
      (e) include minimum information that is required to be obtained for processing an application for credit;
      (f) include well defined criteria and policies for approving new Exposures as well as renewing and refinancing existing Exposures, identifying the appropriate approval authority for the size and complexity of the Exposures;
      (g) include effective credit administration policies, including continued analysis of a borrower's ability and willingness to repay under the terms of the debt, monitoring of documentation, legal covenants, contractual requirements and Collateral, and a classification system that is consistent with the nature, size and complexity of the Authorised Firm's activities or, at the least, with the asset grading system prescribed in PIB Rule 4.5.4;
      (h) include comprehensive policies for reporting Exposures on an on-going basis;
      (i) include comprehensive policies for identifying and managing problem assets;
      (j) include a provisioning policy approved by the Governing Body which ensures that all loans are promptly and prudently provided for;
      (k) set out limits and approval processes involved for the approval of credit facilities that can be approved by the delegated authorities, and stipulate that the Governing Body retains responsibility for the governance of such limits;
      (l) require that major Credit Risk Exposures exceeding a specified amount or at a minimum all Large Exposures of the Authorised Firm are approved by the Authorised Firm's senior management or its designated body like credit committee; and
      (m) require that all Credit Risk Exposures that are especially risky or inconsistent with the approved credit strategy of the Authorised Firm are approved by the Authorised Firm's senior management or its designated body such as a credit committee.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.4

      In relation to conflicts of interest and Related Person transactions, the policy must:

      (a) set out adequate procedures for handling conflicts of interest relating to the provision and management of credit, including measures to prevent any Person directly or indirectly benefiting from the credit being part of the process of granting or managing the credit;
      (b) subject to PIB Rule 4.4.5, prohibit Exposures to Related Persons on terms that are more favourable than those available to Persons who are not Related Persons; and
      (c) if Exposures to Related Persons are allowed on terms which are no more favourable than those available to Persons who are not Related Persons, set out procedures that:
      (i) require such Exposures, and any write-off of such Exposures, exceeding specific amounts or otherwise posing special risks to the Authorised Firm, to be made subject to the prior written approval of the firm's Governing Body or the Governing Body's delegate; and
      (ii) exclude Persons directly or indirectly benefiting from the grant or write off of such Exposures being part of the approval process.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.5

      The prohibition in PIB Rule 4.4.4(b) does not apply to providing credit to a Related Person under a credit policy on terms (such as for credit assessment, tenor, interest rates, amortisation schedules and requirements for Collateral) that are more favourable than those on which it provides credit to Persons who are not Related Persons, provided the credit policy:

      (a) is an Employee credit policy that is widely available to Employees of the Authorised Firm;
      (b) is approved by the Authorised Firm's Governing Body or the Governing Body's delegate;
      (c) clearly sets out the terms, conditions and limits (both at individual and aggregate levels) on which credit is to be provided to such Employees; and
      (d) requires adequate mechanisms to ensure on-going compliance with the terms and conditions of that credit policy, including immediate reporting to the Governing Body or the Governing Body's delegate where there is a deviation from or a breach of the terms and conditions or procedures applicable to the provision of such credit for timely and appropriate action.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.4.5 Guidance

        1. The requirements in these Rules do not prevent arrangements such as Employee loan schemes that allow more favourable and flexible loan terms to Employees of the Authorised Firm than those available under its normal commercial arrangements. However, such a loan scheme must comply with the requirements set out in these Rules, which are designed to address conflicts of interest that may arise in the grant, approval or management of such loans. Such conflicts are especially likely to arise where one or more of the Employees concerned are Directors, Partners or senior managers.
        2. Generally, where an Authorised Firm has an Employee loan scheme under these Rules, the DFSA expects its Governing Body to have ensured, before it or its delegate approved that scheme, that the terms, conditions and particularly limits (both at individual and aggregate level) on which credit is to be provided to Employees under the scheme are adequate and effective in addressing the risks arising from such lending. The Authorised Firm should also be able to demonstrate to the DFSA that the procedures it has adopted relating to an Employee loan scheme are adequate to address any risks arising from such lending. The DFSA expects to have access to records relating to lending under an Employee loan scheme upon request or during its supervisory visits. Any significant breach of or deviation from the procedures adopted in relation to an Employee loan scheme may also trigger the reporting requirements to the DFSA under GEN Rule 11.10.7.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 4.4.6

      For the purposes of the Rules in this chapter, a Person is a "Related Person" of an Authorised Firm if the Person:

      (a) is, or was in the past 2 years:
      (i) a member of a Group or Partnership in which the Authorised Firm is or was also a member; or
      (ii) a Controller of the Authorised Firm or a Close Relative of such a Controller;
      (b) is, or was in the past 2 years, a Director, Partner or senior manager of the Authorised Firm or an entity referred to under (a)(i) or (ii), or a Close Relative of such a Director, Partner or senior manager; or
      (c) is an entity in which a Director, Partner or senior manager of the Authorised Firm or an entity referred to in (a)(i) or (a)(ii), or a Close Relative of such a Director, Partner or senior manager has a significant interest by:
      (i) holding 20% or more of the shares of that entity, or a Parent of that entity, if that entity is a company; or
      (ii) being entitled to exercise 20% or more of the voting rights in respect of that entity;
      except that a Partner is not a Related Person where that Person is a limited partner of a Limited Partnership formed under the Limited Partnership Law of 2006 or any similar limited partnership constituted under the law of a country or territory outside the DIFC.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]