Entire Section

  • RAR 2.2 Resolution Planning

    • RAR 2.2 Guidance

      1. The DFSA may, where it considers it necessary and practicable to do so, prepare a Resolution Plan for an Authorised Firm (see Article 84E of the Law).
      2. The DFSA may, in preparing a Resolution Plan:
      a. create the Resolution Plan, or parts thereof, itself;
      b. amend or accept a resolution plan, or parts thereof, created or provided by the Authorised Firm or any other person (such as a Resolution Authority in another jurisdiction); or
      c. prepare the Resolution Plan using a combination of a. and b.
      3. Where it has prepared a Resolution Plan, the DFSA may review and update it:
      a. on a regular basis; or
      b. after material changes to the legal or organisational structure of the Authorised Firm, or to its business or financial position, which could have a material effect on the effectiveness of the Resolution Plan.

      Content of the Resolution Plan

      4. The Resolution Plan may set out any relevant matters, including the following:
      a. financial and economic functions for which continuity is critical;
      b. the resolution strategy and the Resolution Powers or Resolution Tools which the DFSA would plan to take if the Authorised Firm concerned met the Resolution Conditions, particularly in view of preserving Critical Functions;
      c. options for exercising Resolution Powers and applying Resolution Tools in the context of the potential Resolution scenarios;
      d. data requirements for the Authorised Firm’s operations, structures and Critical Functions;
      e. potential barriers to effective Resolution and actions to mitigate these;
      f. actions to protect depositors and for the prompt return of Client Assets; and
      g. actions or principles for exit from Resolution.

      DFSA’s general approach to resolution planning

      5. The DFSA will aim to approach resolution planning proportionally, taking into account its Resolution Objectives, including the systemic importance of the Authorised Firm or its Group, the need to maintain Critical Functions, protect depositors and Client Assets as well as, more broadly, the impact on and the reputation of the DIFC. Proportionality also implies that the DFSA’s approach will take account of the nature, complexity, interconnectedness, level of substitutability, size and extent of cross-border operations of the Authorised Firm.
      6. The DFSA will consider all potential, credible and feasible options for a resolution strategy for an Authorised Firm, including, where possible, options with respect to the position of the Authorised Firm in its Group Resolution Plan prepared by the home Resolution Authority, provided its relevant parts are available to the DFSA.
      7. The DFSA will cooperate, to the extent possible, with the home Resolution Authority and any other relevant Resolution Authorities.
      8. The DFSA will consider Resolution Plans prepared by other Resolution Authorities in light of its Resolution Objectives and whether the position of the DIFC entity has been adequately taken into account. If the DFSA considers that the preferred resolution strategy, as set out in the Group Resolution Plan, and the outcome for the DIFC, are indeed consistent with its Resolution Objectives and the position of the DIFC entity has been sufficiently taken into account, it may limit its resolution planning to anticipating actions and expressing acceptance of the Group Resolution Plan. This would often imply that, in the event of Resolution, the DFSA would aim to take measures in the DIFC consistent with the home Resolution Authority’s actions taken in line with the Group Resolution Plan. If the DFSA is not satisfied that the Group Resolution Plan meets or is consistent with its Resolution Objectives, it will consider whether it is necessary to pursue alternative or independent strategies as the preferred resolution strategy in the DIFC. The DFSA will attempt to ensure, as far as it is possible, that the DIFC Resolution Plan is as consistent as possible with the Group Resolution Plan.


      Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Obligation to Provide Information for Resolution Plan

      • RAR 2.2 Guidance

        Under Article 84E(4) of the Law, where the DFSA decides to prepare a Resolution Plan for an Authorised Firm it may require the Authorised Firm to provide information or assistance.


        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

      • RAR 2.2.1 RAR 2.2.1

        The information which the DFSA may by written notice require an Authorised Firm to provide for the purposes of preparing, amending or reviewing a Resolution Plan, may include but is not limited to:

        (a) a detailed description of the Authorised Firm’s organisational structure including a list of all legal entities in its Group (“legal entities”);
        (b) identifying the direct holders and the percentage of voting and non-voting rights of each legal entity;
        (c) the location, jurisdiction of incorporation, licensing and key management associated with each legal entity;
        (d) a mapping of the Authorised Firm’s Critical Functions and Core Business Lines including material asset holdings and liabilities relating to such operations and business lines, by reference to legal entities;
        (e) a detailed description of the components of the Authorised Firm’s and all its legal entities’ liabilities, separating, at a minimum by types and amounts of short term and long-term debt, secured, unsecured and subordinated liabilities;
        (f) details of liabilities of the Authorised Firm that are Eligible Liabilities;
        (g) identifying processes needed to determine to whom the Authorised Firm has pledged collateral, the person that holds the collateral and the jurisdiction in which the collateral is located;
        (h) a description of the off-balance sheet exposures of the Authorised Firm and its legal entities, including a mapping to its Critical Functions and Core Business Lines;
        (i) the material hedges of the Authorised Firm including a mapping to legal entities;
        (j) identification of the major or most critical counterparties of the Authorised Firm and entities in its Group as well as an analysis of the impact of the failure of major counterparties on the Authorised Firm’s financial situation;
        (k) each system on which the Authorised Firm conducts a material number or value amount of trades, including a mapping to legal entities in the Group, Critical Functions and Core Business Lines;
        (l) each payment, clearing or settlement system of which the Authorised Firm is directly or indirectly a member, including a mapping to the legal entities in the Group, Critical Functions and Core Business Lines;
        (m) a detailed inventory and description of the key Management Information Systems, including those for risk management, accounting and financial and regulatory reporting used by the Authorised Firm including a mapping to legal entities in the Group, Critical Functions and Core Business Lines;
        (n) identifying the owners of the systems identified in (m), service level agreements related thereto, and any software and systems or licences, including a mapping to their legal entities, Critical Functions and Core Business Lines;
        (o) identifying and mapping the legal entities in the Group and the interconnections and interdependencies among the different legal entities such as:
        (i) common or shared personnel, facilities and systems;
        (ii) capital, funding or liquidity arrangements;
        (iii) existing or contingent credit exposures;
        (iv) cross guarantee agreements, cross-collateral arrangements, cross-default provisions and cross-affiliate netting arrangements;
        (v) risks transfers and back-to-back trading arrangements; and
        (vi) service level agreements;
        (p) the Senior Manager designated under RAR Rule 2.2.2 as well as those responsible, if different, for the different legal entities, Critical Functions and Core Business Lines;
        (q) a description of the arrangements that the Authorised Firm has in place to ensure that, in the event of Resolution, the DFSA will have all the necessary information, as determined by the DFSA, for exercising a Resolution Power and applying a Resolution Tool;
        (r) all the agreements entered into by the Authorised Firm and their legal entities with third parties the termination of which may be triggered by a decision to exercise a Resolution Power and apply a Resolution Tool and whether the consequences of termination may affect the exercise of the Resolution Power and application of the Resolution Tool;
        (s) a description of possible liquidity sources for supporting Resolution; and (t) information on asset encumbrance, liquid assets, off-balance sheet activities, hedging strategies and booking practices.


        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

        • RAR 2.2.1 Guidance

          1. To approach resolution planning on a proportionate basis, and to alleviate the burden on an Authorised Firm, the DFSA will:
          a. consider the actual scope of information required based on the preferred resolution strategy chosen for the Authorised Firm in the DFSA’s discretion.
          b. not require all data to be provided immediately, or from all Authorised Firms. The DFSA will consider the information required in terms of scope and granularity. As the Authorised Firm will be individually contacted by the DFSA, a large majority can expect to be asked to provide, at first, high level core data, and only some would be asked for supplementary information; and
          c. will make use of the information al available to it, e.g. through prudential returns.
          2. The process for requesting, and submission of, information, may require several exchanges between the DFSA and the Authorised Firm and, in many instances, a continual dialogue before the DFSA is satisfied with the information. On this basis, the DFSA may request relevant information from the Authorised Firm or its senior management in writing, as frequently as reasonably necessary, setting out appropriate deadlines to satisfy the request. On site visits may also be carried out.


          Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

    • Person Responsible for Providing Information Relevant to Resolution Planning

      • RAR 2.2.2 RAR 2.2.2

        (1) An Authorised Firm shall designate a Senior Manager who will be responsible for providing the DFSA with the information relevant for the preparation or review of a Resolution Plan.
        (2) The Authorised Firm shall notify the DFSA of the Senior Manager designated under (1).


        Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]

        • RAR 2.2.2 Guidance

          The DFSA considers that it may make sense for an Authorised Firm, from an operational and resourcing perspective, to designate the same Senior Manager who is responsible for Recovery Planning under RAR Rule 2.1.5 as the person responsible under RAR Rule 2.2.2 for providing information relevant to resolution planning.


          Derived from DFSA RMI283/2020 (Made 16th December 2020). [VER1/04-21]