PIB 2 PIB 2 General Requirements
PIB 2 Guidance
This chapter details the threshold conditions for the mandatory maintenance of a
Trading Book, periodic prudential reporting requirements to the DFSA, and guidance on prudent valuation practices. PIB Appendix 2 includes detailed Ruleson the positions to be included in the Trading Book, the valuation of such positions, prudent valuation practices and associated issues related to the identification and treatment of Trading Bookpositions. PIB Appendix 2 also specifies the DFSA'sexpectations with regard to the need for a documented Trading Bookpolicy and risk management systems and controls for the Trading Book. PIB Appendix 2 also presents in a tabular fashion, detailed specifications on periodic prudential reporting requirements for different categories of Authorised Firms.
PIB 2.1 PIB 2.1 Application
This chapter applies to an
Authorised Firmin any Category.
PIB 2.2 PIB 2.2 Trading Book
Authorised Firmmust have a Trading Bookif:(a) it has positions that must be included in a Trading Bookin accordance with PIB section A2.1 of PIB App2;(b) those positions are held with trading intent in accordance with PIB Rule A2.1.5; and(c) the total value of the positions eligible for inclusion in the Trading Bookpursuant to (a) and (b):(i) normally exceeds $15 million or 5% of its combined on and off-balance sheet positions; or(ii) has exceeded $20 million or 6% of its combined on and off-balance sheet positions at any time in the preceding twelve month period.
Authorised Firmthat must have a Trading Bookin accordance with PIB Rule 2.2.1 must:(b) differentiate its business between Trading Bookactivity and Non-Trading Bookactivity on a consistent basis.
Authorised Firmwhich has a Trading Bookmust have adequate systems and controls to:(a) monitor the size of its Trading Book; and(b) ensure that positions are included consistently in its Trading Bookand Non-Trading Bookso that:(i) the inclusion of hedging positions in the Trading Bookor the Non-Trading Bookat all times reflects the intent of the Authorised Firmin holding the position; and(ii) adequate records are made if positions are transferred between Trading and Non-Trading Booksso that the transfers may be identified.
PIB 2.3 PIB 2.3 Reporting to the DFSA
PIB 2.3.1(1) An
Authorised Firmmust comply with the accounting and prudential reporting requirements set out in this chapter and PRUwhich apply to it.(2) The DFSAmay impose additional reporting requirements on an Authorised Firm.
PIB 2.3.2 PIB 2.3.2
Authorised Firmmust, subject to PIB Rule 2.3.3:(a) prepare its returns in accordance with the Rulesin this chapter, the instructional guidelines in PRU, and the requirements of the DFSA'selectronic prudential reporting system; and(b) submit the returns to the DFSAusing the electronic prudential reporting system.
PIB 2.3.2 Guidance
The returns and instructional guidelines are provided in
PRUand the DFSA'selectronic prudential reporting system.
DFSAmay by way of a written notice direct an Authorised Firmto submit its returns in a form, manner or frequency other than as prescribed in PIB Rule 2.3.2. An Authorised Firmmust continue to submit its returns in accordance with this direction until the DFSAby way of written notice directs otherwise.
PIB 2.3.4(1) The submission of any return must be accompanied by a Form B100 (Declaration by
Authorised Firms) signed by the Authorised Firmin the manner set out in (2) or (3) as applicable.(2) In relation to an annual return the form must be signed by two officers of the Authorised Firmeach of whom is a Director, Partneror individual previously approved by the DFSAfor that purpose.(3) In relation to a quarterly return the form must be signed by one officer of the Authorised Firmwho is a Director, Partneror individual previously approved by the DFSAfor that purpose.
An original signed hard copy of Form B100 (Declaration by
Authorised Firms), together with a copy of the return submitted to the DFSAmust be kept for at least 6 years for inspection by the DFSA.
DFSAnotifies an Authorised Firm, or the Authorised Firmitself forms the view, that a return that has been submitted to the DFSAappears to be inaccurate or incomplete, the Authorised Firmmust consider the matter and within a reasonable time it must correct any inaccuracies and make good any omissions, and re-submit the relevant parts of the return.
PIB 2.3.7(1) An
Authorised Firmmust prepare and submit returns in accordance with Table 1 in section A2.4 of PIB App2, which forms part of these Rules.(2) All returns must be completed in thousands of dollars ($).(3) The requirement in (1) does not apply to an Authorised Firm if the only Financial Service it carries on is Managing a Venture Capital Fund.
PIB 2.3.8(1) An
Authorised Firmmust submit to the DFSA any annual return required by Table 1 in PIB section A2.4 of PIB App2, within four months of the end of the Authorised Firm'sfinancial year.(2) An Authorised Firmmust submit to the DFSAany other return required by Table 1 in PIB section A2.4 of PIB App2, within one month after the end of the reporting period to which the return relates.
PIB 2.4 PIB 2.4 Prudent Valuation Practices
PIB 2.4 Guidance1. This section and related PIB section A2.5 in PIB App2 provide
Authorised Firmswith Guidanceon prudent valuation for positions that are accounted for at fair value, whether they are in the Trading Bookor in the Non-Trading Book(also known as the banking book).2. A framework for prudent valuation practices should at a minimum include adequate systems and controls and valuation methodologies. The DFSA'sexpectations in this regard are set out in PIB section A2.5 PIB App2.3. The Guidanceis especially important for positions without actual market prices or observable inputs to valuation, as well as less liquid positions which raise supervisory concerns about prudent valuation. The Guidanceis not intended to require Authorised Firmsto change valuation procedures for financial reporting purposes.4. The DFSAwill assess an Authorised Firm'svaluation procedures for consistency with the Guidance. The DFSAmay impose a valuation adjustment if there is a material degree of inconsistency between the Authorised Firm'svaluation procedures and the Guidance.