Entire Section

  • Treatment of Parental Guarantees

    • PIB 4.15.18

      An Authorised Firm may exclude an Exposure from the Concentration Risk limits set out in PIB Rules 4.15.5 to 4.15.7 where:

      (a) the Authorised Firm’s Parent guarantees that Exposure to a Counterparty or to a group of Closely Related Counterparties; and
      (b) the following conditions are met:
      (i) the Counterparty or group of Closely Related Counterparties are not Connected to the Authorised Firm;
      (ii) the guarantee is to be provided by the Authorised Firm’s Parent, or regulated member of its Group;
      (iii) the criteria for guarantees must be in line with the Credit Risk mitigation requirements as set out in PIB section 4.13;
      (iv) the entity providing the guarantee must be a bank regulated to standards acceptable to the DFSA;
      (v) the total amount of guarantees provided to the Authorised Firm must be less than 10% of the Parent (or other) Authorised Firm’s Tier 1 Capital;
      (vi) the Parent must be rated as a Credit Quality Grade of 1 or 2 by a recognised credit rating agency;
      (vii) the Authorised Firm must provide confirmation from the home state Financial Services Regulator that it is satisfied that the Parent Authorised Firm has sufficient resources to provide such guarantees and has no objection to the provision of such guarantees;
      (viii) the Authorised Firm should provide an annual confirmation that there are no changes to the enforceability of such guarantees; and
      (ix) the Authorised Firm must notify the DFSA when such guarantees represent 200%, 400% and 600% of Tier 1 Capital and the overall Large Exposure limit must not exceed 800%.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
      [Amended] DFSA RMI293/2021 (Made 24th February 2021). [VER38/04-21]