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PIB 3.9A.6 Guidance

1. The location of an Authorised Firm's credit exposure is determined according to the concept of 'ultimate risk', i.e. the location where the risk ultimately lies. This is usually the location of the counterparties, irrespective of the Authorised Firm's own physical location or place of incorporation.
2. The following examples illustrate how the concept of ultimate risk applies:
a. if a firm has an exposure to a borrower in country A, and the risk mitigant (e.g. a guarantor) is in country B, then the ultimate risk is in country B;
b. if, in the example in a, the exposure is only partly mitigated, then the ultimate risk would be split between the uncovered portion in country A and a covered portion in country B;
c. if a firm has an exposure to a borrower that is a Branch in country A, and the head office of the Branch is in country B, then the ultimate risk is in country B; and
d. if a firm has an exposure to a borrower in country A, and the exposure is to finance a project in country B, then the ultimate risk is in country B.
Derived from DFSA RM209/2017 (Made 25th October 2017). [VER30/01-18]