Group of Closely Related Counterparties
PIB A4.11.5(1) For
Concentration Riskpurposes, Personsare Closely Relatedif:(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) Personsare 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 Firmneed 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) Personswho are Closely Relatedto each other are also Connectedwith each other.(5) The requirement to aggregate Exposures where Personsare Closely Related does not apply where an Authorised Firmcan demonstrate to the DFSA that it is unlikely that Personswho are Closely Related will default at the same time and the DFSA has, by notice in writing, disapplied the requirement.
PIB A4.11.6 PIB A4.11.6(1) A single group of
Closely Related Counterpartiesmeans, in relation to an Authorised Firm, all the Personsto which the Authorised Firmhas an Exposureand which are Closely Relatedto each other.(2) An Authorised Firmmust treat two or more Personsas falling within a group of Closely Related Counterpartiesif the Authorised Firmhas Exposuresto them all and any loss to the Authorised Firmon any of the Exposuresto one is likely to be associated with a loss to the Authorised Firmwith respect to at least one Exposureto each of the others.Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
PIB A4.11.6 Guidance:
Two or more
Counterpartiesbetween 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]