Entire Section

  • Group of Closely Related Counterparties

    • PIB A4.11.5

      (1) For Concentration Risk purposes, Persons are Closely Related if:
      (a) the insolvency or default of one of them is likely to be associated with the insolvency or default of the others;
      (b) it would be prudent when assessing the financial condition or creditworthiness of one to consider that of the others;
      (c) there is, or is likely to be, a close relationship between the financial performance of those Persons; or
      (d) they are assessed to be economically interdependent.
      (2) Persons are to be assessed as being economically interdependent for the purposes of (1)(d) where one or more of the following factors are present:
      (a) 50% or more of the annual receipts or expenditures of one is derived from transactions with the other;
      (b) a guarantee issued by one in favour of the other party is likely to result in the provider default if called;
      (c) significant output is sold to the other party and an alternative buyer is not easily found;
      (d) single source of funds to repay loans for both parties with no alternative; or
      (e) common reliance on the same funding provider that is hard to replace.
      (3) An Authorised Firm need not assess economic interdependence under (2) for a transaction where the sum of all Exposures to one individual counterparty is less than 5% of the Authorised Firm’s T1 Capital.
      (4) Persons who are Closely Related to each other are also Connected with each other.
      (5) The requirement to aggregate Exposures where Persons are Closely Related does not apply where an Authorised Firm can demonstrate to the DFSA that it is unlikely that Persons who are Closely Related will default at the same time and the DFSA has, by notice in writing, disapplied the requirement.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
      [Amended] DFSA RMI293/2021 (Made 24th February 2021). [VER38/04-21]

    • PIB A4.11.6 PIB A4.11.6

      (1) A single group of Closely Related Counterparties means, in relation to an Authorised Firm, all the Persons to which the Authorised Firm has an Exposure and which are Closely Related to each other.
      (2) An Authorised Firm must treat two or more Persons as falling within a group of Closely Related Counterparties if the Authorised Firm has Exposures to them all and any loss to the Authorised Firm on any of the Exposures to one is likely to be associated with a loss to the Authorised Firm with respect to at least one Exposure to each of the others.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB A4.11.6 Guidance:

        Two or more Counterparties between whom there is no relationship of control as described in Rules PIB A4.11.5 and PIB A4.11.6 will be regarded as constituting a single risk if they are so interconnected that, if one of them were to experience financial problems, in particular funding or repayment difficulties, the other or all of the others would also be likely to encounter funding or repayment difficulties.

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