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  • PRU-EPRS 1.4 PRU-EPRS 1.4 Instructional Guidelines — Form B10 — Appendix 3 — Market Risk in the Trading Book

    Purpose

    Form B10A3 is intended to capture information on capital charges applicable to market risk Exposures in the Trading Book of an Authorised Firm.

    Applicability

    This form is applicable to Authorised Firms which are Domestic Firms categorised under prudential categories 1 and 2. This form is not applicable to the Authorised Firms operating through a Branch in the DIFC, Islamic Financial Institutions IFIs and Authorised Firms managing PSIAs.

    Content

    The form is designed to enable Authorised Firms to report the capital charges applicable to the various elements of market risk Exposures in their Trading Book and the resultant capital charge for market risk i.e. Market Risk Capital Requirement.

    Structure of the form in EPRS

    B10A3 is presented as a single form in the EPRS.

    Derived from GM5/2007 (Made 16th December 2007). [VER1/12-07]
    [Amended] [VER2/04-13]

    • PRU-EPRS 1.4 Instructional Guidelines

      Item No. Item Instructional Guidelines
      B103_1100, B103_1200, B103_1400, B103_1500, B103_1600 B103_1700 Various components of Market Risk Capital Requirement Detailed Rules and Guidance in respect of the Market Risk Capital Requirement and each of its components are contained in chapter 5 of the PIB module.

      Total of Market Risk Capital Requirement reflected in this form is transferred to form B60 and shown in B600_2630 – Market Risk Capital Requirement.

      The DFSA acknowledges that even for Authorised Firms with relatively straightforward Exposures on the trading books, the underlying calculations for various market risks can be detailed and complex. The DFSA requires Authorised Firms to report only the summary capital charge for various elements of market risk recognised in the Rules under PIB Chapter 5 of the DFSA Rulebook. However, the DFSA expects Authorised Firms to maintain detailed audit trails that substantiate the capital charges reported in this form. Authorised Firms are also reminded that they should make this information available for review as and when required.

      In the event of any uncertainty, Authorised Firms are advised to contact their supervisor for clarity. Authorised Firms are expected to review the material set out Appendix 5 of the PIB module with care given the multiplicity of methods that can be used to calculate the capital requirement on Interest Rate Risk, Equity Risk, FX Risk, Commodities Risk, Options Risk, Securities Underwriting Risk and Collective Investment Fund Risk.

      Where Authorised Firms intend to use internally developed market risk models for the purposes of valuing positions and calculating capital requirements, particular attention is drawn to PIB Section A5.9 and the qualitative criteria.

      Derived from GM5/2007 (Made 16th December 2007). [VER1/12-07]
      [Amended] [VER2/04-13]