Entire Section

  • PIB 9.3 PIB 9.3 Liquidity Requirements

    • PIB 9.3.1

      (1) This section applies to an Authorised Firm in Category 1 or 5.
      (2) The Rules in this section apply, except as provided in (3), to an Authorised Firm on a solo basis.
      (3) The DFSA may require an Authorised Firm to apply the requirements in this section to its Financial Group, if the Authorised Firm and its Financial Group are subject to consolidated supervision.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
      [Amended] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • Global Liquidity Concession

      • PIB 9.3.2 PIB 9.3.2

        (1) An Authorised Firm which carries on business in or from the DIFC through a Branch may apply to the DFSA for a global liquidity concession.
        (2) An application for a global liquidity concession must be made in accordance with the requirements in section PIB A9.1 of App9.
        (3) If the DFSA grants a global liquidity concession to an Authorised Firm, that Authorised Firm need not comply with all or any of the requirements of this section as specified by the DFSA in the concession.
        (4) The DFSA may specify the period for which a global liquidity concession is valid.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 9.3.2 Guidance [Deleted]

          [Deleted] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • HQLA Requirement

      • PIB 9.3.3 PIB 9.3.3

        An Authorised Firm must maintain an adequate level of HQLA to meet its liquidity needs for, at a minimum, a 30 calendar day period under a severe stress scenario.

        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 9.3.3 Guidance

          Rules PIB A9.2.2 to PIB A9.2.9 in App9 set out the conditions that must be met for assets to be treated as HQLA.

          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • Liquidity Coverage Ratio

      • PIB 9.3.4 PIB 9.3.4

        An Authorised Firm must, except as provided in PIB Rule 9.3.8, maintain a LCR of at least the level specified in the table below from the date specified in the table.

        Table - Minimum LCR levels

        Date
        1st January 2015
        1st January 2016
        1st January 2017
        1st January 2018
        1st January 2019
        Minimum LCR
        60%
        70%
        80%
        90%
        100%
        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 9.3.4 Guidance

          Under PIB Rule 9.3.4, an Authorised Firm must maintain a minimum level of LCR of 60% starting on 1 January 2015. The minimum requirement will be increased subsequently in each following year in equal annual steps of 10% to reach 100% on and from 1 January 2019. PIB Rule 9.3.4 sets minimum levels and is not intended to limit the generality of the requirement in PIB Rule 9.3.3.

          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

      • PIB 9.3.5 PIB 9.3.5

        An Authorised Firm must calculate its LCR using the following formula and in accordance with the Rules in section PIB A9.2 of App9.

        LCR = Value of stock of HQLA / Total Net Cash Outflows over the next 30 calendar days

        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 9.3.5 Guidance

          1. Section PIB A9.2 of App9 sets out how the value of stock of HQLA and Total Net Cash Outflows are to be calculated.
          2. An Authorised Firm active in multiple currencies should:
          a. maintain HQLA consistent with the distribution of its liquidity needs by currency;
          b. assess its aggregate foreign currency liquidity needs and determine an acceptable level of currency mismatches; and
          c. undertake a separate analysis of its strategy for each currency in which it has material activities, considering potential constraints in times of stress.
          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • Individual Liquidity Requirement

      • PIB 9.3.6

        (1) The DFSA may by written notice to an Authorised Firm in relation to the LCR Requirement applying to it:
        (a) adjust the LCR Requirement or NSFR Requirement;
        (b) adjust requirements under section PIB A9.2 of App9 for calculating the Authorised Firm's stock of HQLA or the Total Net Cash Outflows, or under section PIB A9.4 of App9 for calculating its ASF or RSF;
        (c) alter the calculation methodologies or parameters for the purposes of the LCR Requirement or NSFR Requirement;
        (d) disapply the LCR Requirement or NSFR Requirement; or
        (e) impose additional requirements based on the DFSA's assessment of the Liquidity Risk exposure of that Authorised Firm.
        (2) If the DFSA amends a requirement under (1)(a), (b), (c) or (e), the Authorised Firm must comply with the requirement as amended. If the DFSA disapplies a requirement under (1)(d), the Authorised Firm need not comply with that requirement.
        (3) The procedures in Schedule 3 to the Regulatory Law apply to a decision of the DFSA under (1)(a),(b),(c) or (e).
        (4) If the DFSA decides to exercise its power under (1)(a),(b),(c) or (e), the Authorised Firm may refer the matter to the FMT for review.
        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

    • Liquid Assets Buffer

      • PIB 9.3.7 PIB 9.3.7

        (1) An Authorised Firm must, except as provided under PIB Rule 9.3.8, maintain a buffer of HQLA over the minimum level of LCR required under its LCR Requirement, appropriate to the nature, scale and complexity of its operations and in line with its Liquidity Risk tolerance.
        (2) In determining the size of its buffer of HQLA under (1), an Authorised Firm must also take into account the results of stress tests conducted under section PIB 9.2A.
        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 9.3.7 Guidance

          1. For the purposes of PIB Rule 9.3.7(2), an Authorised Firm should conduct its own stress tests to assess the level of liquidity it should hold beyond the minimum required under this section, and construct its own scenarios that could cause difficulties for its specific business activities. Such internal stress tests should incorporate longer periods than the one required under this section. Authorised Firms are expected to share the results of these additional stress tests with the DFSA.
          2. As set out in the Guidance after PIB Rule 9.2A.5, the DFSA may require an Authorised Firm to maintain an additional buffer of liquid assets in cases where the DFSA assesses that the Authorised Firm has failed to carry out stress tests effectively.
          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • Liquidation of Assets During Periods of Stress

      • PIB 9.3.8

        During a period of financial or liquidity stress, an Authorised Firm may liquidate part of its stock of HQLA and use the cash generated to cover cash outflows. Its level of HQLA may fall below the levels required under its LCR Requirement and PIB Rule 9.3.7 to the extent necessary to deal with cash outflows during that period.

        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • Notification if LCR Requirement Not Met

      • PIB 9.3.9 PIB 9.3.9

        An Authorised Firm must notify the DFSA in writing immediately if it does not meet, or becomes aware of circumstances that may result in it not meeting, its LCR Requirement (including during a period of stress referred to in PIB Rule 9.3.8).

        [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

        • PIB 9.3.9 Guidance

          1. An Authorised Firm should in its notification clearly explain:
          a. the reasons for not meeting the limits;
          b. measures that have been taken and will be taken to ensure it meets its LCR Requirement; and
          c. its expectations regarding the potential duration of the situation.
          2. An Authorised Firm that makes a notification should discuss with the DFSA what, if any, further steps it should take to deal with the situation.
          [Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]

    • The Maturity Mismatch Approach

      • The Maturity Mismatch Approach Guidance

        The Maturity Mismatch approach measures an Authorised Firm's liquidity by assessing the mismatch between its inflows (assets) and outflows (liabilities) within different timebands on a Maturity Ladder.

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

    • PIB 9.3.10

      (1) An Authorised Firm in Category 1 or 5 must use the Maturity Mismatch approach, as set out in this section, to measure liquidity.
      (2) When using the Maturity Mismatch approach, an Authorised Firm must determine the net cumulative Maturity Mismatch position for each time band by:
      (a) determining, in accordance with the Rules in PIB section A9.3 of App9, the inflows (assets), outflows (liabilities), liquid assets and funding capacity which are to be included in the relevant time bands in the Maturity Ladder; and
      (b) subtracting outflows (liabilities) from inflows (assets) in each time band, and adding the eligible assets, in accordance with section A9.3 of App 9.
      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 RM227/2018 (Made 6th June 2018). [VER32/08-18]

    • Measuring Liquidity for Category 1 and Category 5

      • PIB 9.3.11

        (1) An Authorised Firm in Category 1 or 5 must determine a net cumulative Maturity Mismatch position for each time band in respect of each of the following means of funding used by the Authorised Firm:
        (a) PSIAus; and
        (b) deposits.
        (2) An Authorised Firm in Category 1 or 5 must calculate its liquidity by using the net cumulative Maturity Mismatch position separately for each means of funding used by the Authorised Firm as a percentage of the means of funding in each time band as follows:
        (a) PSIAu net cumulative Maturity Mismatch % =
        Net cumulative Maturity Mismatch x 100
        Total PSIAus
        (b) Total deposit liabilities net cumulative Maturity Mismatch % =
        Net cumulative Maturity Mismatch x 100
        Total deposits
        (3) An Authorised Firm must ensure that its net cumulative Maturity Mismatch position for each means of funding used by the Authorised Firm in the sight - 8 days time band does not exceed negative 15%
        (4) An Authorised Firm must notify the DFSA in writing immediately if it exceeds or is likely to exceed the net cumulative Maturity Mismatch limits referred to in (3).
        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]

    • Net Stable Funding Ratio (NSFR) Requirement

      • PIB 9.3.12 PIB 9.3.12

        (1) An Authorised Firm must maintain a Net Stable Funding Ratio (NSFR) of at least 100%.
        (2) The NSFR under (1) must be calculated using the formula:
        NSFR = ASF x 100
        RSF

        where:

        (a) ASF (Available Stable Funding) is the amount, calculated in accordance with PIB Rule A9.4.1, representing the relative stability of an Authorised Firm's available funding sources; and

        (b) RSF (Required Stable Funding) is the amount, calculated in accordance with PIB Rule A9.4.2, representing the Liquidity Risk profile of an Authorised Firm's assets and OBS Exposures (or potential liquidity Exposures).
        Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

        • PIB 9.3.12 Guidance

          1. The objective of the NSFR Requirement is to require an Authorised Firm to maintain a stable funding profile relative to the composition of its assets and off-balance sheet activities. A stable funding profile reduces the likelihood that disruptions to an Authorised Firm's regular sources of funding will erode its liquidity position in a way that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR Requirement limits over-reliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items and promotes funding stability.
          2. PIB Section A9.4 of App9 sets out how an Authorised Firm's Available Stable Funding (ASF) and Required Stable Funding (RSF) are to be calculated.
          3. If the DFSA considers that the Financial Services Regulator of the home state of an Authorised Firm that is a Branch has not fully implemented the Basel III NSFR requirements, it may use its power under Article 75A of the Regulatory Law to require the Authorised Firm to comply with appropriate NSFR requirements.
          Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

    • Notification if the NSFR Requirement not met

      • PIB 9.3.13 PIB 9.3.13

        An Authorised Firm must notify the DFSA in writing immediately if it does not meet, or becomes aware of circumstances that may result in it not meeting, its NSFR Requirement.

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

        • 9.3.13 Guidance

          1. An Authorised Firm should explain clearly in its notification:
          a. the reasons for it not meeting its NSFR Requirement;
          b. measures that have been taken and will be taken to ensure it meets its NSFR Requirement; and
          c. its expectations regarding the potential duration of the situation.
          2. An Authorised Firm that makes a notification should discuss with the DFSA what, if any, further steps it should take to deal with the situation.
          Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]