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  • PRU-EPRS 1.13 PRU-EPRS 1.13 Instructional Guidelines — Form B20 — Appendix 7 — Details of Market Risk in the Trading Book

    Purpose

    Form B20A7 is intended to capture the details regarding the market risk in the Trading Book of an Authorised Firm.

    Applicability

    This form is applicable to Authorised Firms which are Domestic Firms and are categorised under prudential category 5. It is also applicable to Authorised Firms which are Domestic Firms classified under prudential category 1 and involved in managing PSIAs within an Islamic Window.

    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.

    Structure of the form in EPRS

    The form is split into two linked forms namely, "Interest Rate Risk Capital Requirement" and "All Other Risks".

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

    • PRU-EPRS 1.13 Instructional Guidelines

      1. The first linked form ("Interest Rate Risk Capital Requirement") enables the calculation of the Specific Risk component of Interest Rate Risk Capital Requirement. Note that the relevant amounts have to be entered in respect of self financed, PSIA Unrestricted and PSIA Restricted businesses, separately in the respective columns provided.
      2. In the second linked ("All Other Risk") form summary amounts of all other components of market risk capital requirement such as total Interest Rate Risk, Equity Risk, Foreign Exchange Risk, Commodities Risk, Options Risk, Securities Underwriting Risk and Collective Investment Fund Risk are required to be entered. The relevant amounts should be provided for self financed, PSIA Unrestricted and PSIA Restricted business separately in the respective columns provided.
      3. Authorised Firms are asked to review the Rules set out PIB Appendix 5 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.
      4. 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 only the summary numbers to be reported but expects Authorised Firms to maintain detailed audit trails that substantiate the risk requirements. Authorised Firms are also reminded that they should make this information available for review as and when required.
      5. In the event of any uncertainty, Authorised Firms are advised to contact their supervisor for clarity.
      6. Where Authorised Firms intend to use internally developed market risk models for the purposes of valuing positions and calculating capital requirements as per PIB Section 5.11, particular attention is drawn to PIB Section A5.9 including and the qualitative criteria.
      Item No. Item Instructional Guidelines
      B103_1100, B103_1200, B103_1400, B103_1500, B103_1600, B103_1700 Various components of Market Risk Capital Requirements Detailed Rules and Guidance in respect of the Market Risk Capital Requirement and each of its components are contained in PIB Chapter 5.

      Total of Market Risk Capital Requirement reflected in this form is transferred to form B60 and shown in B600_2630 – Market Risk Capital Requirement.
      Derived from GM5/2007 (Made 16th December 2007). [VER1/12-07]
      [Amended] [VER2/04-13]