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PRU 2.2.13 Guidance for Form PIB 2 — Appendix 7 — Detail of Market Risk in the Trading Book

Instructional Guidelines

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 and to make this information available for review as and when required.

In the event of any uncertainty, Authorised Firms are advised to contact their supervisor for clarity. Authorised Firms are asked to review the material 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.

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.

Authorised Firms should note that the market risks arising from exposures in respect of self financed, PSIAu and PSIAR assets are required to be entered in this Appendix. Authorised Firms are reminded to take care in transposing totals from this Appendix as they relate to the three different sets of exposures.

Item No. Item Guidance
2.A7.1.4
2.A7.2.4
2.A7.4.4
2.A7.5.4
2.A7.6
Capital Requirements The total capital requirements for interest rate, equity position risk, Commodities, Options and Securities Underwriting exposures in respect of self financed assets should be transferred to Form PIB 6, Item Nos. 6.33–6.37 respectively. The capital requirements for PSIA funded assets (both unrestricted and restricted), including the Foreign exchange risk requirement should be transferred to Form PIB 2, Appendix 8 for the calculation of the Displaced Commercial Risk Charge.
2.A7.3 FER capital Requirement The FX risk capital requirement arising from self financed assets should be transferred to Form PIB 6, Item No. 6.24.
2.A7.10 Total Trading Book Capital Requirement The Total Trading Book Capital Requirement here should be transferred to Form PIB 6, Item No. 6.38 in PIB 6.