Entities seeking authorisation as Banks
An entity seeking authorisation to be a Bank, and to carry on its activities in or from the DIFC, will be either:(a) a branch of an existing bank; or(b) a subsidiary of an existing bank (wholly or partially owned); or(c) a start-up entity
Where the applicant falls into categories (a) and (b) above, the
DFSAwill pay particular attention to the soundness of the existing bank of which the proposed DIFCentity is a part. It is our expectation that the existing bank will be a source of strength1 for the DIFCentity. The DFSAwill also pay particular attention to the supervisory relationships it has, or will need to establish, with the supervisor(s) of the existing bank, whichever jurisdiction(s) that is based in. Being able to exchange supervisory information with other relevant supervisors is a cornerstone of the DFSA's regulatory approach.
1 The 'source of strength' doctrine is a well-established and understood concept in banking regulation. It is an expectation that the parent company of a regulated bank will be a source of financial strength and support to that regulated bank should it experience distress
Where the applicant falls into category (c) above, and so is a start-up entity, the
DFSAwill, clearly, not be able to place reliance on existing banking entities or the strength of a larger group. The credibility and financial soundness of the proposed shareholders of the start-up Bankwill, therefore, be a key consideration for the DFSA, as it is these proposed shareholders that the DFSAwould need to look to, to provide support to the Bank, should it encounter difficulties.
DFSAwill have a greater degree of comfort with proposed shareholders who are themselves regulated financial institutions or who have a track record of investing in financial institutions and of providing support to those institutions, if and when such support has been needed. Similarly, if proposed shareholders demonstrably have the financial means to provide further support to the start-up Bank, then this will allow the DFSAto take greater comfort.
Applicants who wish to establish a start-up
Bankin the DIFCshould consider carefully the implications of the absence of a central bank in the DIFC. For example, the DFSAwould expect applicants to address how this fact would affect their:(a) business plan, including any impact on current or prospective credit ratings;(b) adequacy of capital and capital management plan;(c) plans for liquidity management; and(d) ability to deal with stressed situations, including a resolution plan.
In formulating this policy the
DFSArecognises that it is not practical to provide information on the application of the policy to every possible scenario. Therefore, interested parties are invited to contact the DFSAif they have questions about the application of the policy to their particular circumstances.