Entire Section

  • PIB 3.9C PIB 3.9C Failure to meet a Capital Buffer Requirement

    • PIB 3.9C Guidance

      This section sets out measures that an Authorised Firm must take if it is not meeting a Capital Buffer Requirement, i.e. its Capital Conservation Buffer Requirement, CCyB Requirement or HLA Capital Buffer Requirement. The measures, such as not distributing capital and preparing a plan to restore capitalS, do not limit other action that the DFSA may take against the firm for failing to meet the requirement.

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

    • PIB 3.9C.1

      This section applies to an Authorised Firm in Category 1, 2 or 5.

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

    • Restrictions on Distributions

      • PIB 3.9C.2

        Where an Authorised Firm fails to meet a Capital Buffer Requirement requirement, it must:

        (a) calculate the maximum distributable amount in accordance with PIB Rule 3.9C.5;
        (b) ensure that it does not undertake any of the following actions until it has calculated the maximum distributable amount and notified the DFSA under PIB Rule 3.9C.6:
        (i) make a distribution in connection with CET1 Capital;
        (ii) create an obligation to pay variable remuneration or discretionary pension benefits or pay variable remuneration if the obligation to pay was created at a time when the institution failed to meet a Capital Buffer Requirement; or
        (iii) make payments on AT1 and T2 Capital instruments.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.9C.3

        An Authorised Firm must:

        (1) in subsequently taking any of the actions described in PIB Rule 3.9C.2(b)(i) to (iii), ensure that it distributes no more than its calculated maximum distributable amount; and
        (2) prepare and submit a capital conservation plan pursuant to PIB Rule 3.9C.8.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.9C.4

        For the purposes of PIB Rule 3.9C.2(b)(i), a distribution in connection with CET1 Capital includes any of the following:

        (a) payment of cash dividends;
        (b) distribution of fully or partly paid bonus shares or other capital instruments;
        (c) a redemption or purchase by an institution of its own shares or other capital instruments;
        (d) a repayment of amounts paid up in connection with capital; or
        (e) a distribution of other items referred to in PIB section 3.13 as eligible for inclusion as CET1 Capital.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.9C.5

        (1) In this section, a reference to a "maximum distributable amount" means the maximum amount that an Authorised Firm may distribute in connection with CET1 Capital as specified in PIB Rules 3.9C.2 and 3.9C.3.
        (2) Subject to (3), an Authorised Firm must determine the maximum distributable amount by multiplying the sum specified in (a) by the factor determined under (b):
        (a) the total of interim or year-end profits that were not included in CET1 Capital pursuant to PIB Rule 3.13.2 and which have accrued after the most recent distribution of profits and after any of the actions referred to in PIB Rule 3.9C.2(b);
        (b) where the CET1 Capital of the Authorised Firm (which is not used to meet the Capital Requirement), expressed as a percentage of the firm's RWA, is:
        (i) within the first quartile (0%-25%) of its Capital Buffer, the factor is 0;
        (ii) within the second quartile (25%-50%) of its Capital Buffer, the factor is 0.2;
        (iii) within the third quartile (50%-75%) of its Capital Buffer, the factor is 0.4; and
        (iv) within the fourth quartile (75%-100%) of its Capital Buffer, the factor is 0.6.
        (3) If an Authorised Firm undertakes any action under PIB Rule 3.9C.2(b), it must take that into account and reduce the maximum distributable amount accordingly.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.9C.6 PIB 3.9C.6

        For the purpose of PIB Rule 3.9C.2(b), where an Authorised Firm intends to distribute any of its distributable profits or intends to undertake an action referred to in PIB Rule 3.9C.2(b)(i) to (iii), the Authorised Firm must notify the DFSA and provide the following information:

        (a) the amount of capital maintained by the Authorised Firm, subdivided as follows:
        (i) CET1 Capital,
        (ii) AT1 Capital, and
        (iii) T2 Capital;
        (b) the amount of its interim and year-end profits;
        (c) the maximum distributable amount calculated in accordance with this section; and
        (d) the amount of distributable profits it intends to allocate between the following:
        (i) dividend payments,
        (ii) share buybacks,
        (iii) payments on AT1 Capital instruments, and
        (iv) the payment of variable remuneration or discretionary pension benefits, whether by creation of a new obligation to pay, or by payment pursuant to an obligation to pay created at a time when the institution failed to meet a Capital Buffer Requirement.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

        • PIB 3.9.6 Guidance

          Upon receiving a notification under this Rule, the DFSA will make an assessment of the firm's ability to meet and maintain its Capital Requirement on a sustainable basis going forward.

          Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
          [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.9C.7

        An Authorised Firm must maintain systems and processes to ensure that the amount of distributable profits and the maximum distributable amount are calculated accurately, and must be able to demonstrate that accuracy to the DFSA on request.

        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

    • Capital Conservation Plan

      • PIB 3.9C.8

        Where an Authorised Firm fails to meet a Capital Buffer Requirement, it must prepare a capital conservation plan and submit it to the DFSA no later than 5 business days after it identified its failure to meet Capital Buffer Requirement. The capital conservation plan must include the following:

        (a) estimates of income and expenditure and a forecast balance sheet;
        (b) measures to increase the Capital Resources of the Authorised Firm;
        (c) a plan and timeframe for the increase of own funds with the objective of restoring the Capital Buffer; and
        (d) any other information the DFSA might need in order effectively to carry out its considerations referred to in PIB Rule 3.9C.9.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]

      • PIB 3.9C.9

        (1) Following assessment, the DFSA will approve the capital conservation plan only if it considers that the plan, if implemented, would be reasonably likely to conserve or raise sufficient capital to enable the Authorised Firm to meet its Capital Requirement and Capital Buffer Requirement, within a period that the DFSA considers appropriate.
        (2) If the DFSA does not approve the capital conservation plan, the DFSA may require the Authorised Firm to increase its CET1 Capital to meet the Capital Requirement and the Capital Buffer Requirement, within a specified period of time.
        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]
        [Amended] DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]