PIB A4.11.1 PIB A4.11.1(1) An
Authorised Firmmay treat the following Exposuresas exempt from the Concentration Risklimits in PIB chapter 4 if they are to Counterpartiesnot Connectedto the Authorised Firm:(a) asset items or Exposuresconstituting claims on central governments, Central Banksand Public Sector Entities (PSEs) which receive a Credit Quality Grade rating 1 or 2 in accordance with PIB Rule 4.12.4;(b) asset items or Exposuresconstituting claims on international organisations and multi-lateral development banks (MDBs) which receive a 0% (Credit Quality Grade rating of 1) risk weight as set out at PIB Rule 4.12.7;(c) asset items or Exposurescarrying the explicit guarantees of either (a) or (b) where the claims on the entity providing the guarantee would receive a 0% weighting (Credit Quality Grade rating of 1);(d) Exposuresfor which the Authorised Firmhas Collateralin the form of cash deposits or certificates of deposit, including certificates of deposit issued by the Authorised Firm, held by the Authorised Firm, or held by the Authorised Firm's Parent Regulated Financial Institutionor a Subsidiaryof the Authorised Firm, but only if:(i) the Authorised Firmand its Parent Regulated Financial Institutionor the Subsidiaryof the Authorised Firmconcerned are subject to consolidated supervision;(2) If an Authorised Firmobtains credit protection relating to an exempt Exposure under (1)(a), the Authorised Firmmust nevertheless apply the Large Exposure limits to the Exposure to the credit protection provider, notwithstanding that the original Exposure is exempt.(3) An Authorised Firmmust report Exposureswhich are exempt under (1)(a), (b) and (c) to the DFSA.
PIB A4.11.1 Guidance1. In order to be applicable under (c) the guarantees must meet the requirements of PIB section 4.13.9 in relation to
Credit Riskmitigation.2. An Authorised Firmcan only treat Exposuresas Collateralisedprovided the conditions of Rules PIB 4.13.5 to PIB 4.13.8 (relating to Credit Riskmitigation) are met. Item (d) also includes cash received under a credit linked noteissued by the Authorised Firmand loans and deposits of a Counterpartyto or with the Authorised Firmwhich are subject to an on balance sheet Nettingagreement recognised under PIB section 4.13 ( Credit Riskmitigation).3. The DFSAmay consider a waiver for other sovereign Exposureswhere there is a local regulatory requirement to hold assets with a national regulatory authority. Authorised Firmswill be required to apply for a waiver of the Large Exposurerequirements in this regard and will be considered by the DFSAon a case by case basis.4. The DFSA may, where it considers it appropriate, allow two or more Exposures to a sovereign not to be treated as connected or related if the sole reason for linking them is being controlled or economically dependent on the sovereign (including eligible PSEs). An eligible PSE is a PSE referred to in PIB Rule A4.11.1(a).
Exposuresto a client are guaranteed by a third party, or secured by Collateralissued by a third party, an Authorised Firmmay:(a) provided the Collateralmeets the requirements of PIB section 4.13 ( Credit Riskmitigation), and would be assigned a lower risk weight under PIB section 4.12, treat that portion of the Exposurewhich is secured by Collateralas an Exposureto the third party. An Authorised Firmmust treat the portion secured by Collateralas having being incurred to the third party providing the Collateralrather than to the Clientfor the purposes of considering the limits as set out at PIB Rule 4.15.5; or(b) provided the guarantee meets the requirements of PIB section 4.13 ( Credit Riskmitigation), and would be assigned a lower risk weight under PIB section 4.12, treat that portion of the Exposurewhich is guaranteed as an Exposureto the third party. An Authorised Firmmust treat the portion guaranteed as having being incurred to the third party rather than to the Clientfor the purposes of considering the limits as set out at PIB Rule 4.15.5. When considering the guarantee there must not be any maturity mismatch between the guarantee and the underlying Exposure.Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
Exposureis partially guaranteed by an Authorised Firm's Parent Regulated Financial Institution, and would be assigned a lower risk weight under PIB section 4.12, only that part of the Exposuresubject to the guarantee is exempt from the Concentration Risklimits in PIB Rule 4.15.5. When considering the treatment of this Rulean Authorised Firmmay also consider the exemptions permitted under PIB Rule 4.15.18 relating to parental guarantees.Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]