Entire Section

  • PIB 7.2 PIB 7.2 Stress Testing for Non-Trading Book Interest Rate Risk

    • PIB 7.2.1

      An Authorised Firm must carry out an evaluation of its Exposure to the interest rate risk arising from its Non-Trading Book activities. An Authorised Firm with balance sheet positions in different currencies must measure its risk Exposures in each of the material currencies.

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

    • PIB 7.2.2

      (1) The evaluation under PIB Rule 7.2.1 must cover the effect of a sudden and unexpected parallel change in interest rates of 200 basis points in both directions.
      (2) An Authorised Firm must apply a 200 basis point shock to each material currency Exposure it faces as part of its Non-Trading Book.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB 7.2.3 PIB 7.2.3

      An Authorised Firm must immediately notify the DFSA if any evaluation under this section suggests that, as a result of the change in interest rates described in PIB Rule 7.2.2, the economic value of the firm would decline by more than 20% of its Capital Resources.

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

      • PIB 7.2.3 Guidance

        For the purposes of PIB Rule 7.2.1, an Authorised Firm should consider each currency accounting for 5% or more of its Non-Trading Book assets or Non-Trading book liabilities as a material currency Exposure.

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

    • PIB 7.2.4 Frequency of Stress Testing

      An Authorised Firm must carry out the evaluations required by PIB Rule 7.2.1 as frequently as necessary for it to be reasonably satisfied that it has at all times a sufficient understanding of the degree to which it is exposed to the risks referred to in that PIB Rule and the nature of that Exposure. In any case it must carry out those evaluations no less frequently than required by PIB Rule 7.2.6.

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

    • PIB 7.2.5

      In order to carry out effectively the stress testing requirements specified in PIB Rule 7.2.2, an Authorised Firm must include appropriate scenarios into its stress testing programmes for measuring its vulnerability to loss arising from the impact of adverse interest rate movements on its Non-Trading Book structure.

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

    • PIB 7.2.6 PIB 7.2.6

      (1) Subject to (2), the minimum frequency of the evaluation referred to in PIB Rule 7.2.1 is once each year.
      (2) The minimum frequency of an evaluation of the effect of a sudden and unexpected parallel change in interest rates as referred to in PIB Rule 7.2.2 is once each quarter.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB 7.2.6 Guidance

        For the purposes of PIB Rule 7.2.6, an Authorised Firm should consider the standards for stress testing recommended in the paper published by the Basel Committee for Banking Supervision — Principles for management and supervision of interest rate risk — in July 2004. In particular, an Authorised Firm should include the technical specifications of a standardised interest rate shock detailed in Annex 3 of that paper as part of its systems for measurement of interest rate risk in the Non-Trading Book.

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