PRU-EPRS 1.23 Instructional Guidelines

Past version: effective from 16/12/2007 - 13/04/2013
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1. An Authorised Firm operating through a branch presence is required as part of its general systems and controls obligations, to identify and manage the exposures agreed and undertaken by its operations.
2. The 20 largest exposures, in absolute terms, to unconnected counterparties should be listed in the first table and the 10 largest exposures, again in absolute terms, to connected counterparties should be listed in the second table.
Item Instructional Guidelines
Twenty Largest Exposures (Unconnected) Include in this table the twenty largest exposures to all types of Counterparty except those that are connected to the branch.
Exposures to individual, or groups of closely related, counterparties should be reported in descending order by size. Exposures to individual counterparties which constitute a group of closely related counterparties should be reported as one aggregate exposure.
Counterparty The identity of a Counterparty, as defined in the Glossary, in this context will generally be one of the categories as set out in PIB Rule A4.8.6.
Unconnected — Financial, Unconnected — Other, Government The Authorised Firm should clarify here into what category an exposure falls. These are set out in detail in Rules PIB A4.8.7 to PIB A4.8.11 but for the purposes of this form, an Authorised Firm should state whether an Exposure is to:
i. an Unconnected Counterparty or group of Closely Related Counterparties that are predominantly comprised of financial businesses;
ii. an Unconnected Counterparty or group of Closely Related Counterparties that are predominantly comprised of non-financial businesses;
iii. Central governments and central banks.
Amount of exposure at risk For exposures arising in the Non-Trading Book the amount at risk should, with certain exceptions detailed below, be reported as the book value of the Authorised Firm's actual or potential claims, contingent liabilities or assets.

Exposures should be calculated in accordance with internationally or AAOFI accepted accounting practice.

For exposures arising in the Trading Book, all positions should be marked-to-market daily.

Where a market determined price is not readily available, the Authorised Firm may generate its own mark-to-market valuation. Positions should be valued in accordance with the procedures outlined in the Authorised Firm's trading book policy statement.

This is set out in more detail in Rules PIB A4.8.13 to PIB A4.8.31.
Exposure as a percentage of company's equity The branch should use as the denominator the amount its head office has available as regulatory capital (e.g. financial resources). This is intended to provide DFSA with a guide as to the relative size and importance of the exposure for the financial institution as a whole.
Specific bad debt provision Include here the amount of specific bad debt provision that may have been made against a particular exposure.
Reduction by netting, collateral etc. As set out in PIB Rule 4.5.6 (d) (ii), the value of an exposure can be reduced through the following:
•  Collateral — discussed in more detail in PIB Section 4.6 and PIB Rule A4.8.32
•  Netting — discussed in more detail in Sections PIB 4.7 and PIB A4.9
•  Securitisation — discussed in more detail in Sections PIB 4.8 and PIB A4.10
•  Credit derivatives — discussed in more detail in Sections PIB 4.9 and PIB A4.11.
Exposure at reporting date after eligible set-offs Column "Amount of exposure at risk" less the amounts in Columns "Specific bad debt provision" and "Reduction by netting, collateral & other set-offs".
Amount of this exposure financed by own assets or unrestricted PSIAs For Exposures arising out of Islamic business, this column should be used to quantify the amount of the Exposure that is financed by the Authorised Firm's own assets or by unrestricted PSIA assets.
Amount of this exposure financed by restricted PSIAs. For Exposures arising out of Islamic business, this column should be used to quantify the amount of the Exposure that is financed by restricted PSIA assets.
Ten Largest

Exposures

(Connected)
Include in this table the ten largest exposures to connected counterparties i.e. the dis-aggregated detail of all connected lending and exposures should be split into different counterparties within the connected group.
Derived from GM5/2007 (Made 16th December 2007). [VER1/12-07]