PRU-EPRS 1.13 Instructional Guidelines

Past version: effective from 16/12/2007 - 13/04/2013
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1. The first linked form ("Interest Rate Risk Capital Requirement") enables the calculation of the Interest Rate Risk Capital Requirement. Note that the relevant amounts have to be entered in respect of self financed, PSIA Unrestricted and PSIA Restricted businesses, separately in the respective columns provided.
2. In the second linked ("All Other Risk") form summary amounts of all other components of market risk capital requirement such as Equity Risk, Foreign Exchange Risk, Commodities Risk, Options Risk and Securities Underwriting Risk are required to be entered. The relevant amounts should be provided for self financed, PSIA Unrestricted and PSIA Restricted business separately in the respective columns provided.
3. Authorised Firms are asked to review the rules set out PIB Appendix 5 with care given the multiplicity of methods that can be used to calculate the capital requirement on Interest Rate Risk, Equity Risk, FX Risk, Commodities Risk Options Risk and Securities Underwriting Risk.
4. DFSA acknowledges that even for Authorised Firms with relatively straightforward exposures on the trading books, the underlying calculations for various market risks can be detailed and complex. DFSA requires only the summary numbers to be reported but expects Authorised Firms to maintain detailed audit trails that substantiate the risk requirements. Authorised Firms are also reminded that they should make this information available for review as and when required.
5. In the event of any uncertainty, Authorised Firms are advised to contact their supervisor for clarity.
6. Where Authorised Firms intend to use internally developed market risk models for the purposes of valuing positions and calculating capital requirements, particular attention is drawn to PIB Section A5.8 and the qualitative criteria.
Item No. Item Instructional Guidelines
B103_1100, B103_1200, B103_1400, B103_1500, B103_1600 Various risk requirements The total capital requirements for interest rate, equity position risk, Commodities, Options and Securities Underwriting exposures in respect of self financed assets is transferred to Form B60 (item nos. B103_1100 to B103_1600).

The capital requirements for PSIA funded assets (both unrestricted and restricted), including the Foreign exchange risk requirement is transferred to Form B20A8 for the calculation of the Displaced Commercial Risk Charge.
B103_1300 Foreign exchange risk requirement The FX risk capital requirement arising from self financed assets is transferred to Form B60 under Non-Trading Book Capital requirement to item no. B103_1300 (refer PIB Rule 2.8.3).
B103_000T Total Trading Book Capital Requirement The total Trading Book Capital requirement (i.e. MRCOM) here is transferred to the Form B60, item no B600_141T.
Derived from GM5/2007 (Made 16th December 2007). [VER1/12-07]