PIB 3.18.3

For the purpose of determining the Exposure Measure, the value of exposures of an Authorised Firm must be calculated in accordance with the International Financial Reporting Standards (IFRS) subject to the following adjustments:

(a) on-balance sheet, non-derivative exposures must be net of specific allowances and valuation adjustments (e.g. credit valuation adjustments);
(b) physical or financial collateral, guarantees or credit risk mitigation purchased must not be used to reduce on-balance sheet exposures;
(c) loans must not be netted with deposits;
(d) collateral must not be netted against a derivative position, whether or not netting is allowed;
(e) collateral posted against a derivative position must be added to the Exposure Measure if posting the collateral has resulted in a reduction in the Firm’s balance sheet;
(f) if an Authorised Firm writes a credit derivative, it must include the notional value of the derivative in its Exposure Measure without allowing any offset;
(g) if an Authorised Firm is a clearing member of a CCP and is contractually liable to reimburse its Clients or the CCP for losses, as a result of a change in the value of the trading transactions in the event of a default, it must:
(i) treat each transaction as if it were a derivative exposure entered into directly with the Client, including with regard to the provision or receipt of variation margin; and
(ii) include the transaction in its Exposure Measure; and
(h) an item that has been deducted under PIB Section 3.13 from the Tier 1 Capital must also be deducted from the Exposure Measure, except where that item relates to a liability.
[Added] DFSA RM148/2014 (Made 1st January 2015). [VER23/01-15]
[Amended] DFSA RMI322/2021 (Made 1st January 2022). [VER41/01-22]