Entire Section

  • PIB 1 PIB 1 Application, Interpretation and Categorisation

    • PIB 1.1 PIB 1.1 Application

      • PIB 1.1.1

        (1) This module (PIB) applies to every Authorised Firm other than:
        (a) an Insurer;
        (b) a Representative Office; and
        (c) a Credit Rating Agency.
        (2) The Rules in PIB apply to an Authorised Firm in accordance with its Category determined under PIB section 1.3.
        (3) Where a chapter, part or section of PIB applies to a limited scope of Categories of Authorised Firm, the term "Authorised Firm" used in those provisions is to be read accordingly.
        (4) The Rules in PIB apply to the whole business of an Authorised Firm except in relation to Client Assets and Insurance Money that are held or controlled by an Authorised Firm which are not included in any prudential calculation.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Branches

        • PIB 1.1.2 PIB 1.1.2

          Unless otherwise directed by the DFSA, an Authorised Firm that is a Branch is required to comply with the Rules in chapters 2 to 11 as specifically provided in "Application Table A" which forms part of this Rule.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

          • PIB 1.1.2 Guidance

            1. The effect of PIB Rule 1.1.1(1) is that these Rules apply to all Authorised Firms, except those carrying on Insurance Business (that is, Insurers), that operate a Representative Office and those that are CRAs. Those Authorised Firms that are authorised to effect or carry out Contracts of Insurance should refer to the PIN module. Authorised Firms that are authorised to Operate a Representative Office should refer to the REP module.
            2. These Rules apply both to Domestic Firms and, to the extent specified in PIB Rule 1.1.2, to Authorised Firms conducting Financial Services through a Branch in the DIFC.
            3. The Rules in PIB reinforce the fitness and propriety requirements found in GEN chapter 5 - Management Systems and Principle 4 for Authorised Firms. The PIB module is set out in:
            a. an initial chapter establishing a categorisation of firms for the application of PIB;
            b. two general chapters setting overall requirements: General Requirements and Capital;
            c. six chapters setting specific requirements relating to the following particular risks or issues: Credit Risk, Market Risk, Operational Risk, Interest Rate Risk in the Non-Trading Book, Group Risk and Liquidity Risk;
            d. a chapter imposing processes for supervisory assessment, by which an Authorised Firm which is a Domestic Firm in Category 1, 2 or 5 has obligations to establish and conduct an IRAP and an ICAAP, and to provide documented assessments to the DFSA; and
            e. a final chapter imposing public disclosure requirements.

            Domestic Firms

            4. To assist Authorised Firms that are Domestic Firms there is a table "Application Table B" which sets out in general the application of the provisions in this module to different Categories of Authorised Firms. This table is for Guidance purposes only. The Rules in this module apply to Authorised Firms in accordance with this Chapter and as specified in Rules elsewhere in this module.
            5. With regards to Authorised Firms carrying on Islamic Financial Business, there are additional matters that should be included in their report to the DFSA which are in the Islamic Finance Rules (IFR) module (see IFR section 5.4 of IFR module).

            APPLICATION TABLE A FOR AUTHORISED FIRMS THAT OPERATE AS A BRANCH IN THE DIFC

            PIB Chapters Category 1 Category 2 Category 3A Category 3B Category 3C Category 3D Category 4 Category 5
            PIB Chapter 1: Application, Interpretation and Categorisation Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter
            PIB Chapter 2: General Requirements Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter
            PIB Chapter 3: Capital Only PIB Rule 3.2.4 Only PIB Rule 3.2.4 Only PIB Rule 3.2.4 Only PIB Rule 3.2.4 Only PIB Rule 3.2.4 Only PIB Rule 3.2.4 Only PIB Rule 3.2.4 Only PIB Rule 3.2.4
            PIB Chapter 4: Credit Risk Only PIB sections 4.1 to 4.4 and PIB Rules 4.5.1 to 4.5.7 and 4.5.9 Only PIB sections 4.1 to 4.4 and PIB Rules 4.5.1 to 4.5.7 and 4.5.9 Only PIB sections 4.1 to 4.4 and PIB Rules 4.5.1 to 4.5.7 and 4.5.9         Only PIB sections 4.1 to 4.4 and PIB Rules 4.5.1 to 4.5.7 and 4.5.9
            PIB Chapter 5: Market Risk Only PIB sections 5.1 and 5.2 Only PIB sections 5.1 and 5.2 Only PIB sections 5.1 and 5.2         Only PIB sections 5.1 and 5.2
            PIB Chapter 6: Operational Risk Whole Chapter, except PIB sections 6.11 and 6.12 Whole Chapter, except PIB sections 6.11 and 6.12 Whole Chapter, except PIB sections 6.11 and 6.12 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.11 and 6.12
            PIB Chapter 7: Interest Rate Risk In the Non-Trading Book Whole Chapter Whole Chapter            
            PIB Chapter 8: Group Risk Only PIB sections 8.1, 8.2 and 8.5 Only PIB sections 8.1, 8.2 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1, 8.2 and 8.5
            PIB Chapter 9: Liquidity Risk Whole Chapter, except PIB Rules 9.2.2(3), 9.3.12 and 9.3.13 Only PIB Rule 9.2.2(3)           Whole Chapter, except PIB Rules 9.2.2(3), 9.3.12 and 9.3.13
            PIB Chapter 10: Supervisory Review and Evaluation Processes                
            PIB Chapter 11: Disclosure Requirements                

            APPLICATION TABLE B FOR AUTHORISED FIRMS THAT OPERATE AS A DOMESTIC FIRM

            PIB Chapters Category 1 Category 2 Category 3A Category 3B Category 3C Category 3D Category 4 Category 5
            PIB Chapter 1: Application, Interpretation and Categorisation Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter
            PIB Chapter 2: General Requirements Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter Whole Chapter
            PIB Chapter 3: Capital Whole Chapter, except PIB Rules 3.2.4 and 3.2.6, and PIB sections 3.4, 3.5, 3.7, 3.8A and 3.8B Whole Chapter, except PIB Rules 3.2.4 and 3.2.6, and PIB sections 3.33.5, 3.7, 3.8A and 3.8B Whole Chapter, except PIB Rules 3.2.4 and 3.2.6, except PIB sections 3.3, 3.5, 3.9, 3.9A, 3.9B, 3.9C and 3.18 Whole Chapter, except PIB Rules 3.2.4 and 3.2.7, and PIB sections 3.3, 3.4, 3.8, 3.9, 3.9A, 3.9B, 3.9C and 3.18 Whole Chapter, except Rules Rules 3.2.4 and 3.2.7, and PIB sections 3.3, 3.4, 3.8, 3.9, 3.9A, 3.9B, 3.9C and 3.18 Whole Chapter, except PIB Rules 3.2.4 and 3.2.7, and PIB sections 3.3, 3.4, 3.8, 3.9, 3.9A, 3.9B, 3.9C and 3.18 Whole Chapter, except PIB Rules 3.2.4 and 3.2.7, and PIB sections 3.3, 3.4, 3.8, 3.9, 3.9A, 3.9B, 3.9C and 3.18 Whole Chapter, except PIB Rules 3.2.4 and 3.2.6, and PIB sections 3.4, 3.5 and 3.7
            PIB Chapter 4: Credit Risk Whole Chapter Whole Chapter Whole Chapter         Whole Chapter
            PIB Chapter 5: Market Risk Whole Chapter Whole Chapter Only PIB sections 5.1, 5.2 and 5.6         Whole Chapter, except PIB section 5.4
            PIB Chapter 6: Operational Risk Whole Chapter, except PIB section 6.12 Whole Chapter, except PIB section 6.12 Whole Chapter, except PIB section 6.12 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB sections 6.10 and 6.11 Whole Chapter, except PIB section 6.12
            PIB Chapter 7: Interest Rate Risk In the Non-Trading Book Whole Chapter Whole Chapter            
            PIB Chapter 8: Group Risk Whole Chapter Whole Chapter Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Only PIB sections 8.1 and 8.5 Whole Chapter
            PIB Chapter 9: Liquidity Risk Whole Chapter, except PIB Rule 9.2.2(3) Only PIB Rule 9.2.2(3).           Whole Chapter, except PIB Rule 9.2.2(3)
            PIB Chapter 10: Supervisory Review and Evaluation Processes Whole Chapter Whole Chapter Whole Chapter Whole Chapter, except PIB sections 10.4 and 10.6 Whole Chapter, except PIB sections 10.4 and 10.6 Whole Chapter, except PIB sections 10.4 and 10.6   Whole Chapter
            PIB Chapter 11: Disclosure Requirements Whole Chapter Whole Chapter           Whole Chapter
            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
            [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]
            [Amended] DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]

    • PIB 1.2 PIB 1.2 Glossary for PIB

      • PIB 1.2 Guidance

        Set out under PIB Rule 1.2.1 are a number of mainly technical definitions used solely in PIB. Such definitions do not also appear in GLO unless they are used elsewhere in the Rulebook. GLO also contains definitions of abbreviations, terms and phrases used in PIB and those are also included in PIB 1.2.1 for convenience purposes where such definitions are embedded in PIB specific definitions. Commonly used definitions such as "Authorised Firms", "Domestic Firms", and "Financial Services" appear only in GLO.

        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 1.2.1

        The following terms and abbreviations bear the following meanings for the purpose of this module:

        Alternative Standardised Approach The manner in which the Operation Risk Capital Requirement is calculated in accordance with PIB sections 6.11 and A6.3.
        Annual Audited Expenditure The expenditure calculated in accordance with PIB Rule 3.7.3 or, if applicable, PIB Rule 3.7.3A.
        Asset-Backed Commercial Paper (ABCP) Programme A programme that predominately issues commercial paper with an Original Maturity of one year or less that is backed by assets or other Exposures held in a bankruptcy-remote SPE.
        AT1 Additional tier 1
        AT1 Capital Has the meaning given in PIB section 3.14.
        Available Stable Funding (ASF) The amount, calculated in accordance with PIB Rule A9.4.1, representing the relative stability of an Authorised Firm's available funding sources.
        ASF Category The applicable category, listed in the table to PIB Rule A9.4.1, to which the carrying value of a liability or capital instrument of an Authorised Firm is assigned.
        ASF Factor The applicable factor, listed in the table to PIB Rule A9.4.1, used to multiply the carrying value of a liability or capital instrument of an Authorised Firm.
        Base Capital Requirement Has the meaning given in PIB section 3.6.
        Basel Committee The Basel Committee on Banking Supervision.
        Basic Indicator Approach The manner in which the Operational Risk Capital Requirement is calculated in accordance with PIB sections 6.11 and A6.1.
        Capital Buffer In relation to an Authorised Firm, means the sum of the following (to the extent applicable to the firm):
        (a) Capital Conservation Buffer;
        (b) Countercyclical Capital Buffer; and
        (c) HLA Capital Buffer.
        Capital Buffer Requirement Means a requirement to maintain any one or more of the following:
        (a) Capital Conservation Buffer;
        (b) Countercyclical Capital Buffer; or
        (c) an HLA Capital Buffer.
        Capital Conservation Buffer The Capital Buffer that an Authorised Firm must maintain under PIB section 3.9.
        Capital Conservation Buffer Requirement The requirement to maintain a Capital Conservation Buffer under PIB section 3.9.
        Capital Requirement The amount of capital an Authorised Firm must hold, calculated in accordance with PIB sections 3.3, 3.4, 3.5, 3.9, 3.9A or 3.9B as applicable.
        Capital Resources The total Capital Resources of an Authorised Firm calculated in accordance with PIB section 3.11.
        Category A prudential grouping of Authorised Firms which determines the application of the Rules in this Module.
        CCF Credit conversion factor
        CCP Central Counterparty
        CEA Credit equivalent amount
        CET1 Common equity tier 1
        CET1 Capital Has the meaning given in PIB section 3.13.
        Clean-Up Call An option that permits the SE Exposures (e.g. asset-backed Securities) to be called before all of the underlying Exposures or SE Exposures have been repaid. In the case of Traditional Securitisations, this is generally accomplished by repurchasing the remaining SE Exposures once the pool balance or outstanding Securities have fallen below some specified level. In the case of a synthetic Exposure, the Clean-Up Call may take the form of a clause that extinguishes the credit protection.
        Close Links A Person (Person A) has Close Links with a Person (Person B) if:
        (a) Person B:
        (i) is a Holding Company of Person A;
        (ii) is a Subsidiary of Person A;
        (iii) is a Holding Company of the Subsidiary of Person A;
        (iv) is a Subsidiary of a Holding Company of Person A; or
        (v) owns and controls 20% or more of the voting rights or shares of Person A; or
        (b) Person A owns and controls 20% or more of the voting rights or shares of Person B.
        Closely Related Has the meaning given in PIB Rule A4.11.5.
        Collateral Any form of asset, guarantee, or indemnity which is held or controlled by an Authorised Firm and is subject to a security interest or arrangement in favour of that firm.
        Collective Investment Fund Risk Capital Requirement A component of Market Risk Capital Requirement calculated in accordance with PIB section 5.9.
        Commodities Risk Capital Requirement A component of the Market Risk Capital Requirement to cover the risk of holding or taking positions in commodities, including precious metals, but excluding gold, calculated in accordance with PIB section 5.7.
        Concentration Risk The risk faced by an Authorised Firm arising out of its Large Exposures.
        Connected In relation to a Person (A), a Person which has or has at any relevant time had the following relationship to A:
        (a) a member of A's Group;
        (b) a Controller of A;
        (c) a member of a partnership of which A is a member;
        (d) an employee or former employee of A;
        (e) if A is a company:
        (i) an officer or manager of A or of a parent of A;
        (ii) an agent of A or of a parent of A;
        (f) if A is a partnership is or has been a member, manager or agent of A; or
        (g) if A is an unincorporated association of persons which is not a partnership, is or has been an officer, manager or agent of A.
        Connected Counterparties Has the meaning given in PIB Rule A4.11.7.
        Contingency Funding Plan (CFP) The plan referred to in PIB Rule 9.2A.6.
        Controlled Early Amortisation Early Amortisation that meets the conditions in PIB Rule 4.14.58.
        Countercyclical Capital Buffer (CCyB) The countercyclical capital buffer that an Authorised Firm must maintain under PIB section 3.9A.
        CCyB Authority
        (1) For the State, means the Central Bank; and
        (2) For any other jurisdiction, means the authority in that jurisdiction responsible for setting CCyB Rates.
        CCyB Rate A rate expressed as a percentage of Risk Weighted Assets that applies under PIB Rules 3.9A.7 to 3.9A.9.
        CCyB Requirement The requirement to maintain a Countercyclical Capital Buffer under PIB section 3.9A.
        Counterparty Means any person with or for whom an Authorised Firm carries on, or intends to carry on, any regulated business or associated business. In this context, Counterparty includes an individual, unincorporated body, company, government, local authority or other public body.
        Counterparty Risk The risk that an Authorised Firm's Counterparty does not perform its obligations under the terms of a contract.
        CR Exposure The Exposure value or amount for a Credit Risk Exposure.
        Credit Derivative Any contract which transfers the Credit Risk of a reference obligation or set of reference obligations from the protection buyer to the protection seller, such that the protection seller has an Exposure to the reference obligation(s).
        Credit Enhancement A contractual arrangement in which the Authorised Firm retains or assumes an SE Exposure and, in substance, provides some degree of added protection to other parties to the transaction.
        Credit Quality Grade A credit quality step in a credit quality assessment scale. A credit quality assessment scale is a scale onto the credit assessments of an ECAI or an expert credit agency are mapped.
        Credit Risk In relation to an Authorised Firm, the risk of loss if another party fails to perform on its financial obligation to the Authorised Firm.
        Credit Risk Capital Requirement (CRCOM) The requirement calculated in accordance with PIB section 4.6.
        Credit-Enhancing Interest-Only Strip An on-balance sheet asset that:
        (i) represents a valuation of cash flows related to future margin income; and
        (ii) is subordinated.
        CRW Credit risk weight for an Exposure.
        CV Contracted value for delivery.
        Delta The measure of an Option's sensitivity to a change in value of the underlying investment, asset or property.
        Displaced Commercial Risk Capital Requirement The requirement calculated in accordance with IFR chapter 5.
        Domestic Systemically Important Bank (D-SIB) An Authorised Firm designated by the DFSA under PIB section 1.4 as a domestic systemically important bank.
        Duration Method A measure of General Market Risk calculated in accordance with PIB Rule A5.2.19.
        E An Exposure value or amount
        E* An Exposure value or amount adjusted in the manner provided in the relevant Rule
        EAE The Exposure value or amount for an Early Amortisation Exposure
        Early Amortisation A mechanism that, once triggered, allows investors to be paid out prior to the originally stated maturity of the securities issued. For risk-based capital purposes, an Early Amortisation provision will be considered either controlled or non-controlled.
        ECAI A CRA or an external credit rating agency approved by the DFSA for the purpose of this Module.
        Equity Risk Capital Requirement A component of Market Risk Capital Requirement and calculated in accordance with PIB section 5.5.
        Evergreening Evergreening refers to the practice by some banks to roll over or renew their non-performing loans or potentially nonperforming loans, so that they can avoid recognising them as non-performing loans in their accounts and consequently avoid provisioning for them.
        Excess Spread Gross finance charge collections and other income received by the trust or SPE minus certificate interest, servicing fees, charge-offs, and other senior trust or SPE expenses.
        Expenditure Based Capital Minimum A Capital Requirement calculated in accordance with PIB section 3.7.
        Exposure The maximum loss that an Authorised Firm (and where applicable its PSIA holders) might suffer if:
        (a) a Counterparty or a group of Connected Counterparties fail to meet their obligations; or
        (b) it realises assets or off-balance sheet positions.
        An Exposure also includes any asset or off-balance sheet item, which could result in a potential loss to the Authorised Firm due to Market Risk or Operational Risk or any other risk factor.
        FCCA Financial Collateral Comprehensive Approach as described in PIB Rule 4.9.5.
        FCSA Financial Collateral Simplified Approach as described in PIB Rule 4.9.5.
        Financial Group A group of entities which includes an Authorised Firm and:
        (a) any Parent incorporated in the DIFC;
        (b) any Financial Institution subsidiaries (whether direct or indirect) of the Parent or Parents in (a) or of the Authorised Firm;
        (c) any Financial Institution in which the Parent or Parents in (a), the Financial Institution subsidiaries in (b) or the Authorised Firm (whether direct or indirect) hold 20% or more of the voting rights or capital; and
        (d) any entity which the DFSA directs the Authorised Firm to include in accordance with PIB Rule 8.1.2 or PIN Rule 8.1.2.
        Financial Group Capital Requirement The Capital Requirement of a Financial Group calculated in accordance with PIB Rule 8.3.3 or PIN Rule 8.3.3.
        Financial Group Capital Resources The Capital Resources of a Financial Group calculated in accordance with PIB Rule 8.3.4 or PIN 8.3.4.
        First Loss Position Represents the first level of support provided to the special purpose entity or vehicle that should bear all, or a significant part of, the risk associated with the items held by the special purpose entity or vehicle.
        Foreign Exchange Risk Capital Requirement A component of the Market Risk Capital Requirement and as calculated in accordance with PIB section 5.6.
        Gamma The measure of the rate of change of Delta.
        General Market Risk
        (1) For the purposes of the Interest Rate Risk Capital Requirement, means the risk that losses may arise from price changes in Securities caused by parallel or non-parallel shifts in the yield curve or from price movements in the equity market for a given country;
        (2) For the purposes of the Equity Risk Capital Requirement, means the risk that losses may arise from a price movement in the equity market for a given country; or
        (3) For the purposes of internal models, means both of the above risks.
        Global Systemically Important Bank (G-SIB) An Authorised Firm designated by the DFSA under PIB section 1.4 as a global systemically important bank.
        Group Means a group of entities which includes an entity (the 'first entity') and:
        (a) any Parent of the first entity; and
        (b) any subsidiaries (direct or indirect) of the Parent or Parents in (a) or the first entity.
        Group Risk The risk of loss to the Authorised Firm as a result of its membership of, or linkages within a Group.
        High Quality Liquid Assets (HQLA) Liquid assets that meet the conditions in PIB Rules A9.2.2 to A9.2.9 of App 9.
        HLA Capital Buffer A higher loss absorbency capital buffer that a SIB must maintain under PIB section 3.9B.
        HLA Capital Buffer Requirement The requirement to maintain a higher loss absorbency capital buffer under PIB section 3.9B.
        HLA Ratio In relation to a SIB, means the ratio determined by the DFSA under PIB Rule 3.9B.6 for that SIB.
        ICR (Individual Capital Requirement) Individual capital requirement
        Implicit Support Arises when an Authorised Firm provides support to a securitisation in excess of its predetermined contractual obligation.
        Individual Liquidity Requirement An individual liquidity requirement imposed by the DFSA under PIB Rule 9.3.6.
        Interest Rate Risk Capital Requirement A component of Market Risk Capital Requirement and calculated in accordance with PIB section 5.4.
        Internal Capital Adequacy Assessment Process (ICAAP) The internal capital adequacy assessment process prescribed in PIB chapter 10.
        Internal Risk Assessment Process (IRAP) The internal risk assessment process prescribed in PIB section 10.3.
        Investment Grade A credit rating which is a Credit Quality Grade of 1, 2 or 3.
        Large Exposure Has the meaning given in PIB Rule 4.15.4.
        LCR Requirement The LCR required to be maintained by an Authorised Firm under PIB Rule 9.3.4 or, if applicable, under PIB Rule 9.3.6.
        Leverage Ratio The amount expressed as a percentage that is calculated in accordance with the Rules in PIB section 3.18.
        Leverage Ratio Exposure Measure The value of an Authorised Firm's exposures calculated in accordance with PIB Rule 3.18.3 to determine its Leverage Ratio.
        Liquidity Coverage Ratio (LCR) The amount expressed as a percentage that is calculated in accordance with PIB Rule 9.3.5 and PIB section A9.2 of App 9.
        Liquidity Risk The risk of loss to an Authorised Firm as a result of inability to meet its obligations as they fall due.
        Market Risk The risk of loss that arises from fluctuations in the values of, or income from, assets or in interest or exchange rates.
        Market Risk Capital Requirement The requirement calculated in accordance with PIB Rule 5.3.1.
        Matched Principal Has the meaning described in PIB Rule 1.3.3(2).
        Maturity Ladder A table that ordinally ranks the maturity time bands and assets and liabilities within them.
        Maturity Method This is an advanced approach that an Authorised Firm may use to measure the risk of holding or taking positions in debt Securities and other interest rate-related instruments, calculated in accordance with PIB Rule A5.2.17.
        MDB Multilateral development bank
        Modified Duration The time period calculation for the purposes of the Duration Method in accordance with PIB Rule A5.2.21.
        MV Market value
        Net Stable Funding Ratio (NSFR) The amount, expressed as a percentage, calculated in accordance with PIB Rule 9.3.12, or, if applicable, PIB Rule 9.3.6.
        Netting A process by which the claims and obligations between two Counterparties are offset against each other to leave a single net sum.
        Non-Financial Private Sector Credit Exposure A Credit Risk Exposure to a party other than:
        (a) a sovereign;
        (b) a regional, provincial or municipal government;
        (c) a public sector entity;
        (d) a multilateral development bank; or
        (e) a bank.
        Non-Trading Book Describes positions, Exposures and on-and off-balance sheet items, which are not in the Trading Book.
        NP Nominal principal amount.
        NSFR Requirement The requirement for an Authorised Firm to maintain a minimum NSFR under PIB Rule 9.3.12(1) or, if applicable, PIB Rule 9.3.6.
        OSB< Off-balance sheet.
        OBS Exposure An Exposure of an Authorised Firm that is off-balance sheet..
        OBS-RSF Category A category, listed in Table 2 to PIB Rule A9.4.2, to which carrying value of an OBS Exposure (or potential liquidity Exposure) is assigned..
        OBS-RSF Factor The factor, listed in Table 2 to PIB Rule A9.4.2, used to multiply the carrying value of an OBS Exposure (or a potential liquidity Exposure)..
        Operational Risk The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.
        Operational Risk Capital Requirement The requirement calculated in accordance with PIB section 6.11.
        Option Risk Capital Requirement A component of the Market Risk Capital Requirement and calculated in accordance with PIB section 5.8.
        Original Maturity
        (1) The time period between the date an offer is made and the date it expires or lapses.
        (2) In relation to Debentures, the interval between its issue date and the date on which it becomes due and payable.
        Originator
        (a) an entity which, either itself or through related entities, directly or indirectly, creates the Exposure being securitised; or
        (b) any entity which purchases or advises or causes an SPE to purchase the Exposures of a third party, which are then used in a securitisation (for avoidance of doubt, selling credit protection such that the entity or the SPE has a long position in the Credit Risk of the obligor is equivalent to purchasing Exposures);
        Where an entity lends to an SPE with a view to enabling that SPE to make loans which are then used in a securitisation, the entity will generally be deemed to be acting as an Originator.
        OTC Over the counter
        Potential Future Credit Exposure (PFCE) An amount calculated by multiplying the nominal principal amount of an OTC derivative contract by a specified percentage dependent on the nature and residual maturity of the contract.
        PSE Public sector enterprise
        PSIA Profit sharing investment account.
        Qualifying CCP Means a CCP:
        (a) that is operated by an Authorised Person in accordance with its Licence; or
        (b) in respect of which all of the following conditions are met:
        (i) the CCP is authorised and supervised by a Financial Services Regulator in a jurisdiction other than the DIFC;
        (ii) the Financial Services Regulator has publicly stated that it applies on an ongoing basis rules and regulations that are consistent with the CPSS-IOSCO Principles for Financial Market Infrastructures; and
        (iii) the CCP satisfies the Basel Committee requirements for calculating its capital requirements for its default fund exposures.
        Qualifying Holding Any holding in the capital of a non-financial Undertaking of which the Authorised Firm is a controller.
        Related Person Has the meaning given in PIB Rule 4.4.6.
        Relevant Entity Means any of the following:
        (a) another Authorised Firm;
        (b) a Regulated Financial Institution;
        (c) any unregulated Financial Institution; or
        (d) any financial holding company.
        Required Stable Funding (RSF) The amount, calculated in accordance with PIB Rule A9.4.2, representing the stable funding required by an Authorised Firm.
        RSF Category A category, listed in Table 1 to PIB Rule A9.4.2, to which the carrying value of an Authorised Firm's asset is assigned.
        RSF Factor The applicable factor, listed in Table 1 to PIB Rule A9.4.2, used to multiply the carrying value of an asset of an Authorised Firm.
        Re-securitisation Has the meaning given in PIB section 4.14.
        Restricted PSIA (PSIAr) A PSIA in respect of the investment account holder imposes certain restrictions as to where, how and for what purpose his funds are to be invested.
        Revolving Securitisation A Traditional or Synthetic Securitisation in which the specified items consist of revolving assets such as loan facilities or credit card balances which permit borrowers to vary the drawn amount within an agreed limit, or the scheme itself is revolving.
        Rho The measure of an Option's sensitivity to a change in interest rates.
        Risk Capital Requirement Has the meaning given in PIB Rule 3.8.1A.
        Risk Weighted Assets (RWA) The risk weighted assets of an Authorised Firm calculated in accordance with PIB Rule 3.8.2.
        SE Exposure The Exposure value or amount for a securitisation Exposure.
        Securities Underwriting Capital Requirement A component of the Market Risk Capital Requirement defined in PIB section 5.10.
        Servicer A Person that administers the securitised items.
        SFT Securities financing transactions, such as repo, reverse repo, security lending and borrowing, and margin lending transactions.
        Simplified Approach An alternative application of the provisions of PIB chapter 4 for an Authorised Firm in Category 2 and 3A, as described in PIB sections 4.7 and A4.12.
        Special Purpose Entity (SPE) A corporation, trust, or other entity organised for a specific purpose, the activities of which are limited to those appropriate to accomplish the purpose of the SPE, and the structure of which is intended to isolate the SPE from the Credit Risk of an Originator or seller of Exposures. SPEs are commonly used as financing vehicles in which Exposures are sold to a trust or similar entity in exchange for cash or other assets funded by debt issued by the trust.
        Specific Risk The risk that losses on an Authorised Firm's net long or short position in an individual equity or Security may arise from a negative or positive price movement of that equity or Security relative to the relevant market generally.
        Sponsor An Authorised Firm that repackages third party assets directly into a securitisation scheme. Where an Authorised Firm repackages non-Investment Grade third party assets, it may fall within the definition of an Originator unless it originates or repackages no more than 10% of the scheme's total assets.
        Standardised Approach The manner in which the Operational Risk Capital Requirement is calculated in accordance with PIB sections 6.11 and A6.2.
        Stored Value Capital Requirement Has the meaning given in PIB section 3.8A.
        Supervisory Review and Evaluation Process (SREP) The supervisory review and evaluation process prescribed in PIB chapter 10.
        Synthetic Securitisation Has the meaning given in PIB Rule 4.14.2(b).
        Systemically Important Bank (SIB) An Authorised Firm designated by the DFSA under PIB section 1.4 to be either or both of the following:
        (a) a D-SIB; or
        (b) a G-SIB.
        T Trade date, which is the date on which a transaction is entered into.
        T1 Tier 1
        T1 Capital Has the meaning given in PIB Rule 3.12.1.
        T2 Tier 2
        T2 Capital Has the meaning given in PIB Rule 3.15.1.
        Theta The ratio of the change in an Option price to the decrease in time to expiration. Theta can also be referred to as time decay.
        Total Net Cash Outflow Has the meaning given in PIB Rule A9.2.13
        Total Return Swap A contract under which two parties exchange their positive or negative returns on a notional amount of a reference asset for a specified period of time.
        Trading Book The positions and Exposures including, on and off-balance sheet items eligible for inclusion in the Trading Book, as described in PIB section 2.2.
        Traditional Securitisation Has the meaning given in PIB Rule 4.14.2(a).
        Transaction Based Capital Requirement Has the meaning given in PIB section 3.8B.
        Unrestricted PSIA (PSIAu) A PSIA in respect of which the investment account holder authorises the Authorised Firm to invest the account holder's funds in a manner which the Authorised Firm deems appropriate without laying down any restrictions as to where, how and for what purpose the funds should be invested.
        Unsettled Transaction A transaction where delivery of an instrument is due to take place against the receipt of cash but remains outstanding.
        Vega The measure of the sensitivity of the value of the Option to a change in the volatility of the underlying asset.
        Walkaway Clause A provision which permits a non-defaulting party to make payments, or no payments at all, to the estate of the defaulter, even if the defaulter is a net creditor.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]
        [Amended] DFSA RMI250/2019 (Made 18th December 2019). [VER34/12-19]
        [Added] DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]
        [Amended] DFSA RMI293/2021 (Made 24th February 2021). [VER38/04-21]

    • PIB 1.3 PIB 1.3 Categories of Authorised Firms

      • PIB 1.3 Guidance

        1. Authorised Firms are divided into Categories to provide a clear framework for determining which specific Rules in PIB apply to each Authorised Firm. The Rules in this section enable an Authorised Firm to determine into which Category it falls.
        2. The table in PIB A1.1 of PIB App1 sets out the categorisation process diagrammatically. In that table, an emboldened box indicates the Financial Service that is determinative of the Category into which an Authorised Firm falls. An Authorised Firm may, if authorised under its Licence to do so, conduct any number of Financial Services specified under any lower Category than the one that applies to the Authorised Firm in accordance with this section (For this purpose Category 5 is considered to be equivalent to Category 1). For example, a Category 1 firm could conduct any of the Financial Services specified under Categories 2, 3A, 3B, 3C, 3D or 4 (if authorised to do so). However, a Category 4 firm may only conduct any of the Financial Services listed under Category 4 for which it is authorised.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Added] DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]

      • Category 1

        • PIB 1.3.1 PIB 1.3.1

          An Authorised Firm is in Category 1 if:

          (a) its Licence authorises it to carry on one or more of the Financial Services of Accepting Deposits or Managing a PSIAu; and
          (b) it does not meet the criteria of Category 5.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

          • PIB 1.3.1 Guidance

            A Category 1 Authorised Firm may be authorised to conduct other Financial Services, but it is the authorisation for Accepting Deposits or Managing a PSIAu that is determinative of its belonging to Category 1.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Category 2

        • PIB 1.3.2 PIB 1.3.2

          An Authorised Firm is in Category 2 if:

          (a) its Licence authorises it to carry on one or more of the Financial Services of Providing Credit or Dealing in Investments as Principal; and
          (b) its dealing activities are not limited in scope as provided in PIB Rule 1.3.3(1)(a)(i); and
          (c) it does not meet the criteria of Categories 1 or 5.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

          • PIB 1.3.2 Guidance

            1. A Category 2 Authorised Firm may be authorised to conduct other Financial Services, but it is the authorisation for Dealing in Investments as Principal (not only as a Matched Principal) or authorisation for Providing Credit, and the absence of authorisation for the activities specified in PIB Rule 1.3.1, that are determinative of its belonging to Category 2.
            2. Where the dealing activities of a firm are limited to acting only as Matched Principal, the activities fall in the scope of Category 3A in accordance with PIB Rule 1.3.3(1). A definition of "Matched Principal" is in PIB Rule 1.3.3(2).
            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Category 3A

        • PIB 1.3.3 PIB 1.3.3

          (1) An Authorised Firm is in Category 3A if:
          (a) its Licence authorises it to carry on one or more of the Financial Services of:
          (i) Dealing in Investments as Principal (where it does so only as a Matched Principal); or
          (ii) Dealing in Investments as Agent; and
          (b) it does not meet the criteria of Categories 1, 2 or 5.
          (2) For the purposes of PIB, an Authorised Firm Deals in Investments as a "Matched Principal" if:
          (a) it enters into transactions as a principal only for the purpose of fulfilling its Clients' orders;
          (b) it holds positions for its own account ("positions") only as a result of a failure to match Clients' orders;
          (c) the total market value of the positions it holds is no more than 15% of the Firm's Tier 1 Capital Resources; and
          (d) the positions are incidental in nature and are strictly limited to the time reasonably required to carry out a transaction of that nature.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

          • PIB 1.3.3 Guidance

            A Category 3A Authorised Firm may be authorised to conduct other Financial Services, but it is the authorisation for Dealing in Investments as Agent, or authorisation for Dealing in Investments as Principal where it does so as a Matched Principal, and the absence of authorisation for the activities specified in Rules PIB 1.3.1 and PIB 1.3.2 that are determinative of its belonging to Category 3A.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Category 3B

        • PIB 1.3.4 PIB 1.3.4

          An Authorised Firm is in Category 3B if:

          (a) its Licence authorises it to carry on one or more of the Financial Services of:
          (i) Providing Custody (where it does so for a Fund); 
          (ii) Acting as the Trustee of a Fund
          (iii) Operating an Employee Money Purchase Scheme; or
          (iv) Acting as the Administrator of an Employee Money Purchase Scheme; and
          (b) it does not meet the criteria of Categories 1, 2, 3A or 5.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
          [Amended] DFSA RMI263/2019 Made 18th December 2019). [VER35/01-20]

          • PIB 1.3.4 Guidance

            A Category 3B Authorised Firm may be authorised to conduct other Financial Services, but it is the authorisation for Providing Custody for a Fund, Acting as Trustee of a Fund or Operating or Acting as the Administrator of an Employee Money Purchase Scheme, and the absence of authorisation for the activities specified in Rules PIB 1.3.1, PIB 1.3.2 and PIB 1.3.3 that are determinative of its belonging to Category 3B.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
            [Amended] DFSA RMI263/2019 Made 18th December 2019). [VER35/01-20]

      • Category 3C

        • PIB 1.3.5 PIB 1.3.5

          An Authorised Firm is in Category 3C if:

          (a) its Licence authorises it to carry on one or more of the Financial Services of:
          (i) Managing Assets;
          (ii) Managing a Collective Investment Fund;
          (iii) Providing Custody (where it does so other than for a Fund);
          (iv) Managing a PSIA (which is a PSIAr);
          (v) Providing Trust Services (where it is acting as trustee in respect of at least one express trust); or
          (vi) Providing Money Services (where it issues Stored Value); and
          (b) it does not meet the criteria of Categories 1, 2, 3A, 3B or 5.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
          [Amended] DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]

          • PIB 1.3.5 Guidance

            A Category 3C Authorised Firm may be authorised to conduct other Financial Services, but it is the authorisation for Managing Assets, Managing a Collective Investment Fund, Providing Custody other than for a Fund, Managing a PSIA which is a PSIAr, Providing Trust Services (where it is acting as a trustee in respect of at least one express trust), or Providing Money Services (where it issues Stored Value) and the absence of authorisation for the activities specified in PIB Rules 1.3.1, 1.3.2, 1.3.3 and 1.3.4 that are determinative of its belonging to Category 3C.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
            [Amended] DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]

      • Category 3D

        • PIB 1.3.5A

          An Authorised Firm is in Category 3D if:

          (a) its Licence authorises it to Provide Money Services and it:
          (i) provides or operates a Payment Account;
          (ii) executes a Payment Transaction on a Payment Account provided or operated by another Person; or
          (iii) issues a Payment Instrument; and
          (b) it does not meet the criteria of Categories 1, 2, 3A, 3B, 3C or 5.
          Derived from DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]

      • Category 4

        • PIB 1.3.6 PIB 1.3.6

          An Authorised Firm is in Category 4 if:

          (a) its Licence authorises it to carry on one or more of the Financial Services of Arranging Deals in Investments, Advising on Financial Products, Arranging Custody, Insurance Intermediation, Insurance Management, Operating an Alternative Trading System, Providing Fund Administration, Providing Trust Services (where it is not acting as trustee in respect of an express trust), Providing Money Services (where it only provides Money Transmission), Arranging Credit and Advising on Credit, Operating a Crowdfunding Platform or Arranging or Advising on Money Services; and
          (b) it does not meet the criteria of Categories 1, 2, 3A, 3B, 3C, 3D or 5.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
          [Amended] DFSA RM188/2016 (Made 7th December 2016). [VER26/02-17]
          [Amended] DSFA RM203/2017 (Made 14th June 2017). [VER28/08-17]
          [Amended] DFSA RMI270/2020 (Made 26th February 2020). [VER36/04-20]

          • PIB 1.3.6 Guidance

            An Authorised Firm in Category 4 may not be authorised to conduct any other Financial Service beyond those listed in PIB Rule 1.3.6(a); if it were so authorised it would belong to another Category.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • Category 5

        • PIB 1.3.7 PIB 1.3.7

          An Authorised Firm is in Category 5 if it:

          (a) is an Islamic Financial Institution; and
          (b) Manages a PSIAu.
          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

          • PIB 1.3.7 Guidance

            Authorised Firms in Categories 1 to 4 may also carry out Islamic Financial Business, but only those Authorised Firms in Categories 1 or 5 may Manage a PSIAu. They will not fall within Category 5 unless the whole of the business is conducted in accordance with Shari'a and they Manage a PSIAu.

            Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 1.4 PIB 1.4 Systemically Important Banks (SIBs)

      • PIB 1.4 Guidance

        1. This section provides for the DFSA to be able to designate an Authorised Firm as a Systemically Important Bank (SIB). A SIB is a bank whose impact, if it were to fail, could cause significant disruption to the financial system and the broader economy. To address the additional risks that SIBs pose, SIBs are subject to specific regulatory and supervisory measures, including higher capital charges in the form of an additional buffer (an HLA Capital Buffer) and more intensive supervision.
        2. The DFSA will base its approach to identifying SIBs, and the measures that it applies to SIBs, on the framework issued by the Basel Committee.
        3. In accordance with the Basel Committee framework, this section provides for the DFSA to designate two types of SIBs: global systemically important banks (G-SIBs) and domestic systemically important banks (D-SIBs). The main difference between the two types of SIBs, is that G-SIBs are capable of having a significant impact on the effective working and stability of the global financial system, while the potential impact of D-SIBs is on the local or regional financial system. The differences in the requirements that apply to each are explained later in this section.
        4. In appropriate cases, the DFSA may designate an Authorised Firm as both a G-SIB and a D-SIB if its failure could have a significant impact on both the global and regional financial systems. If the DFSA designates a firm as both a G-SIB and a D-SIB, the HLA Capital Buffer that applies will be whichever is the higher of the amount calculated for it as a G-SIB and the amount calculated for it as a D-SIB (see PIB Rule 3.9B.3). If a firm is a G-SIB, it does not automatically mean that it will be a D-SIB. For example, a firm may be systemically important globally, but it may not conduct significant business locally or regionally.
        Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • Global Systemically Important Banks (G-SIBs)

        • PIB 1.4.1

          The DFSA will designate an Authorised Firm as a G-SIB if:

          (a) it is a Domestic Firm in Category 1 or 5;
          (b) it is a member of a Group that is included on the list of global systemically important banks published by the Financial Stability Board; and
          (c) the DFSA is the overall consolidated supervisor of that Group.
          Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

        • PIB 1.4.2 PIB 1.4.2

          The DFSA may designate an Authorised Firm as a G-SIB if:

          (a) the conditions in paragraphs (a) and (b) of Rule 1.4.1 are met in relation to the Authorised Firm; and
          (b) the DFSA is not the overall consolidated supervisor of the Group but it considers that it is appropriate to treat the Authorised Firm as a G-SIB.
          Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

          • PIB 1.4.2 Guidance

            1. The Financial Stability Board (FSB), in consultation with the Basel Committee, identifies and periodically publishes a list of global systemically important banks.
            2. If the DFSA is the consolidated supervisor of a Group included on the FSB list of global systemically important banks, it will designate an Authorised Firm in the Group that is a bank as a G-SIB (see Rule 1.4.1).
            3. If an Authorised Firm that is a bank is part of a Group included on the FSB list, but the DFSA is not the consolidated supervisor of that Group, the DFSA may designate that Authorised Firm as a G-SIB if it considers it is appropriate to do so in all the circumstances (see Rule 1.4.2). If the DFSA proposes to designate an Authorised Firm as a G-SIB where it is not the consolidated supervisor of the relevant Group, it will normally consult first with the consolidated supervisor to ensure that the supervisors are taking a co-ordinated approach.
            4. A G-SIB, in addition to being subject to more intensive supervision, must maintain an extra capital buffer (the HLA Capital Buffer) under PIB section 3.9B. At the consolidated Group level, a G-SIB also has to publish quantitative indicators relating to its systemic importance (see PIB Rule 11.1.3 and App 11 Table 15) and carry out recovery and resolution planning.
            Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • Domestic Systemically Important Banks (D-SIBs)

        • PIB 1.4.3 PIB 1.4.3

          The DFSA may designate an Authorised Firm as a D-SIB if:

          (a) it is a Domestic Firm or Branch in Category 1, 2 or 5; and
          (b) the DFSA considers that the risks associated with the Authorised Firm are such that, if it were to fail, it could have a significant impact on the effective working and stability of the banking or financial system locally or regionally.
          Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

          • PIB 1.4.3 Guidance

            1. The DFSA will, in assessing if it should designate an Authorised Firm as a D-SIB, take into account the factors suggested by the Basel Committee in its framework for domestic systemically important banks. Those factors include the size, interconnectedness, substitutability and complexity of the firm. The DFSA will publish the general assessment methodology it applies in assessing if it should designate a firm as a D-SIB.
            2. The DFSA may designate an Authorised Firm as a D-SIB whether it is a Domestic Firm or a Branch. However, the measures that apply to a D-SIB that is a Branch will be less extensive than those that apply to a D-SIB that is a Domestic Firm. For example, while both are subject to more intensive supervision, a D-SIB that is a Branch will not be subject to the HLA Capital Buffer Requirement. This is because most capital requirements in chapter 3 do not apply to a Branch as it is subject to capital requirements applied by its home state regulator.
            Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • Procedures for designating SIBs

        • PIB 1.4.4 PIB 1.4.4

          (1) The DFSA may amend or cancel a designation made under this section.
          (2) The DFSA must publish a copy of any designation made under this section or any amendment or cancellation of that designation.
          (3) The procedures in Schedule 3 to the Regulatory Law apply to a DFSA decision to designate an Authorised Firm as a SIB or to amend the designation.
          (4) If the DFSA decides to designate an Authorised Firm as a SIB or to amend the designation, the Authorised Firm may refer the matter to the FMT for review.
          (5) Paragraphs (3) and (4) do not apply to a DFSA decision to designate a G-SIB under PIB Rule 1.4.1 or to amend the designation.
          Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

          • PIB 1.4.5 Guidance

            The Schedule 3 procedures and the right of review by the FMT do not apply to the designation of a G-SIB under Rule 1.4.1 (see Rule 1.4.4(5)). This is because the DFSA, under Rule 1.4.1, will designate a bank as a G-SIB if it is included on the list of global systemically important banks published by the Financial Stability Board.

            Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]