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  • PIB 4.12 PIB 4.12 Risk Weights

    • PIB 4.12.1 PIB 4.12.1

      An Authorised Firm with a CR Exposure must:

      (a) for a CR Exposure that is not past due for more than 90 days, determine the applicable risk weight in accordance with Rules PIB 4.12.2 to PIB 4.12.23;
      (b) for a CR Exposure that is past due for more than 90 days, determine the applicable risk weight in accordance with Rules PIB 4.12.24 to PIB 4.12.26; and
      (c) for a CR Exposure arising from an Unsettled Transaction, determine the applicable risk weight in accordance with Rules PIB A4.6.5 to PIB A4.6.8.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.1 Guidance

        Where a CR Exposure which is not past due has a Credit Quality Grade which corresponds to a risk weight of 150%, an Authorised Firm may apply the appropriate treatment and risk weights set out in Rules PIB 4.12.24 to PIB 4.12.26.

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

    • Cash Items

      • PIB 4.12.2

        Subject to PIB Rule 4.12.3, an Authorised Firm may apply a 0% risk weight to any CR Exposure categorised as a cash item.

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

      • PIB 4.12.3

        An Authorised Firm must apply a 20% risk weight to cheques, drafts and other items drawn on other banking institutions that are either payable immediately upon presentation or that are in the process of collection.

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

    • Central Government and Central Bank Asset Class

      • PIB 4.12.4

        Subject to PIB Rule 4.12.5, an Authorised Firm must risk-weight any CR Exposure in the central government and Central Bank asset class in accordance with the table below.

        Risk weights for the central government and Central Bank asset class

        Credit Quality Grade 1 2 3 4 5 6 Unrated
        Risk Weight 0% 20% 50% 100% 100% 150% 100%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.5

        An Authorised Firm may apply a 0% risk weight to any CR Exposure to central governments or central banks of a GCC member country which are denominated and funded in the domestic currency of the GCC member country. For the purposes of this Rule, individual Emirates of the UAE will be considered as though they were GCC member countries.

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

    • Public Sector Enterprises (PSE) Asset Class

      • PIB 4.12.6 PIB 4.12.6

        (1) Subject to PIB Rule 4.12.8, an Authorised Firm must risk-weight any CR Exposure in the PSE asset class in accordance with the following table:

        Risk Weights for the PSE asset class
        Credit Quality Grade 1 2 3 4 5 6 Unrated
        Risk Weight 20% 50% 100% 100% 100% 150% 100%
        (2) In (1), sovereign PSEs in the UAE and GCC that exhibit Credit Risks comparable to their central government must be treated in accordance with the requirements set out in PIB Rule 4.12.5.
        (3) For the purposes of this Rule, a sovereign PSE is a PSE which has been designated as such by its national authorities.
        (4) Any foreign currency claims on sovereign PSEs which are determined to meet the conditions of (2) must be treated as one grade less favourable than the risk weight allocated in accordance with Rules PIB 4.12.4 and PIB 4.12.5.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB 4.12.6 Guidance

          Any PSE which exhibits risk characteristics of a commercial enterprise should be treated in accordance with Rules PIB 4.12.13 to PIB 4.12.15.

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

    • Multilateral Development Bank (MDB) Asset Class

      • PIB 4.12.7

        Subject to Rules PIB 4.12.8 and PIB 4.12.9, an Authorised Firm must risk-weight any CR Exposure in the MDB asset class in accordance with the following table:

        Risk Weights for the MDB asset class

        Credit Quality Grade 1 2 3 4 5 6 Unrated
        Risk Weight 0% 50% 50% 100% 100% 150% 50%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.8

        An Authorised Firm must apply a 0% risk weight to any CR Exposure to the qualifying MDBs set out below:

        (a) The World Bank Group comprised of the International Bank for Reconstruction and Development (IBRD), the Multilateral Investment Guarantee Agency (MIGA), and the International Finance Corporation (IFC);
        (b) The Asian Development Bank (ADB);
        (c) The African Development Bank (AfDB);
        (d) The European Bank for Reconstruction and Development (EBRD);
        (e) The Inter-American Development Bank (IADB);
        (f) The European Investment Bank (EIB);
        (g) The European Investment Fund (EIF);
        (h) The Nordic Investment Bank (NIB);
        (i) The Caribbean Development Bank (CDB);
        (j) The Islamic Development Bank (IDB); and
        (k) The Council of Europe Development Bank (CEDB).
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.9

        An Authorised Firm must apply a 0% risk weight to any CR Exposure to the Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Commission, or the European Stability Mechanism.

        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM215/2018 (Made 22nd February 2018). [VER31/04-18]

    • Bank Asset Class

      • PIB 4.12.10 PIB 4.12.10

        Subject to Rules PIB 4.12.11 and PIB 4.12.12, an Authorised Firm must risk-weight any CR Exposure in the bank asset class in accordance with the following table:

        CRWs for the bank asset class

        Credit Quality Grade 1 2 3 4 5 6 Unrated
        Risk Weight 20% 50% 50% 100% 100% 150% 50%
        Risk Weight for Short-Term Exposures 20% 20% 20% 50% 50% 150% 20%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

        • PIB 4.12.10 Guidance

          For the purposes of the above table, short-term Exposures refer to Exposures with an Original Maturity of three months or less and that are not expected to be rolled over.

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

      • PIB 4.12.11

        An Authorised Firm must risk-weight any short-term CR Exposure in the bank asset class with an issue-specific external credit assessment in accordance with the following table.

        CRWs for short-term CR Exposures in the bank asset class with issue-specific external credit assessments

        Short-Term Credit Quality Grade I II III IV
        Risk Weight 20% 50% 100% 150%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.12

        The CRW for any CR Exposure in the bank asset class that does not have an external credit assessment by a recognised external credit rating agency must be the risk weight determined in accordance with the table in PIB Rule 4.12.10 or the risk weight that is applicable to an CR Exposure to the central government of the jurisdiction in which the banking institution is incorporated or established, whichever is higher. If a short-term CR Exposure in the bank asset class with an issue-specific external credit assessment:

        (a) attracts a risk weight of 50% or 100%, then the Authorised Firm must apply a risk weight of not lower than 100% to any unrated short-term CR Exposure to the same banking institution; or
        (b) attracts a risk weight of 150%, then the Authorised Firm must apply a risk weight of 150% to any unrated CR Exposure (whether long-term or short-term) to the same banking institution.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • Corporate Asset Class

      • PIB 4.12.13

        Subject to Rules PIB 4.12.14 and PIB 4.12.15, an Authorised Firm must risk-weight any CR Exposure in the corporate asset class in accordance with the following table:

        Risk Weights for the corporate asset class

        Credit Quality Grade 1 2 3 4 5 6 Unrated
        Risk Weight 20% 50% 100% 100% 150% 150% 100%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.14

        An Authorised Firm must risk-weight any short-term CR Exposure in the corporate asset class with an issue-specific external credit assessment in accordance with the following table:

        Risk Weights for short-term CR Exposures in the corporate asset class with issue-specific external credit assessments.

        Short-Term Credit Quality Grade I II III IV
        Risk Weight 20% 50% 100% 150%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.15

        The risk weight for any CR Exposure in the corporate asset class that does not have an external credit assessment by a recognised external credit rating agency must be the risk weight determined in accordance with the table under PIB Rule 4.12.13 or the risk weight that is applicable to an CR Exposure to the central government of the jurisdiction in which the corporate is incorporated or established, whichever is higher. If a short-term CR Exposure in the corporate asset class with an issue-specific external credit assessment:

        (a) attracts a risk weight of 50% or 100%, then the Authorised Firm must apply a risk weight of not lower than 100% to any unrated short-term CR Exposure to the same corporate; or
        (b) attracts a risk weight of 150%, then the Authorised Firm must apply a risk weight of 150% to any unrated CR Exposure (whether long-term or short-term) to the same corporate.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • Regulatory Retail Asset Class

      • PIB 4.12.16

        An Authorised Firm must apply a 100% risk weight to any CR Exposure in the regulatory retail asset class.

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

    • Residential Mortgage Asset Class

      • PIB 4.12.17

        An Authorised Firm must risk weight any CR Exposure in the residential mortgage asset class in accordance with the following table:

        Risk weights for the residential mortgage asset class

        Condition Risk Weight
        Loans fully secured on residential property to a maximum loan to value of 80% 50%
        Loans secured on residential property in excess of a loan to value of 80% 100%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • Commercial Real Estate Asset Class

      • PIB 4.12.18

        An Authorised Firm must apply a 100% risk weight to any CR Exposure in the commercial real estate asset class.

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

      • PIB 4.12.19

        An Authorised Firm must apply a risk weight of 150% to Exposures, including Exposures in the form of Shares or Units in a Collective Investment Fund, that are associated with particularly high risks.

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

      • PIB 4.12.20

        For the purposes of PIB Rule 4.12.19, Exposures with particularly high risks must include the following investments:

        (a) investments in venture capital funds
        (b) investments in hedge funds or alternative investment funds, including but not limited to private equity funds;
        (c) speculative immovable property financing; and
        (d) any investments declared by the DFSA to constitute high risk for the purpose of this Rule.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.21

        When assessing whether an Exposure other than Exposures referred to in PIB Rule 4.12.20 is associated with particularly high risks, an Authorised Firm must take into account the following risk characteristics:

        (a) there is a high risk of loss as a result of a default of the obligor; and
        (b) it is impossible to assess adequately whether the Exposure falls under (a).
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • Other Exposures Asset Class

      • PIB 4.12.22

        An Authorised Firm must apply a 100% risk weight to any CR Exposure in the other Exposures asset class.

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

      • PIB 4.12.23

        Investments in equity or regulatory capital instruments issued by banks or securities firms must be risk weighted at 100%, unless deducted from the capital base.

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

    • Past Due Exposures

      • PIB 4.12.24

        Subject to Rules PIB 4.12.25 and PIB 4.12.26, an Authorised Firm must risk-weight the unsecured portion of any CR Exposure that is past due for more than 90 days in accordance with the following table.

        Risk weights for past due Exposures

        Condition Risk Weight
        Where specific provisions are less than 20% of the outstanding amount of the Exposure 150%
        Where specific provisions are no less than 20% of the outstanding amount of the Exposure 100%
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.25

        For the purposes of PIB Rule 4.12.24, an Authorised Firm must calculate the unsecured portion of any CR Exposure that is past due for more than 90 days as follows:

        (a) for an Authorised Firm using the FCSA:
        Unsecured Portion = E – P – Cf
        where:
        (i) E = E calculated in accordance with PIB section 4.9;
        (ii) P = notional amount of eligible credit protection received; and
        (iii) Cf = fair value of eligible financial Collateral received; or
        (b) for an Authorised Firm using the FCCA:
        Unsecured Portion = E* – P
        where —
        (i) E* = E* calculated in accordance with PIB section 4.9; and
        (ii) P = notional amount of eligible credit protection received.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 4.12.26

        An Authorised Firm must apply a 100% risk weight to any CR Exposure in the residential mortgage asset class that is past due for more than 90 days.

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