Authorised Firms are referred to
[PIB Chapter 4] and [PIB Appendix 4] to understand the background to risk weighting assets in the non trading book. In particular, [PIB Section A4.3] contains detailed requirements in respect on weighting exposures in the appropriate risk buckets. If an Authorised Firm is uncertain as to where to classify a particular exposure, it should contact DFSA to obtain this clarity. Particular care should be taken for exposures classified in anything other than the 100% risk weighting category.
Among other things, risk weightings may be reduced on non trading book items by obtaining a guarantee from a third party or a party connected to the Authorised Firm (the "guarantor"). Provided the conditions laid out in Rules
[PIB A4.3.1] to [PIB A4.3.4] are met, the Authorised Firm may opt to use the counterparty weighting of the guarantor where this risk weighting is less than that for the underlying counterparty.
||Mortgage backed securities
||Investments in mortgage backed securities only attract a 50% rating provided the conditions set out in
|[PIB Rule A4.3.6] are met in its entirety.
||Assets arising from Islamic contracts
||In respect of counterparty weightings for exposures in the non trading books, Authorised Firms are referred Rules
|[PIB 3.5.1] to [PIB 3.5.5]. In particular, attention is drawn to the weightings referred to in table 2 by Islamic contract type. Authorised Firms are reminded that in the event of any doubt in this area, they should contact the DFSA for clarification.
||Include all other investments arising from Islamic contracts not referred to above.
||Off balance sheet items
||Details of Credit Conversion Factors are set out in Rules
|[PIB A4.3.10] to [PIB A4.3.14]. Authorised Firms are reminded to be cautious in capturing off balance sheet exposures and to refer any matters of uncertainty to DFSA for greater clarification.
||Sale and Repurchase Agreements
||Attention is drawn to Rules
|[PIB A4.3.15] to [PIB A4.3.17] which note that the counterparty weight of a repo agreement is by reference to the issuer of the asset subject to the agreement and not to the counterparty to the repurchase agreement. The weight on a reverse repo is determined as if it were a collateralised loan to a counterparty
||Authorised Firms are referred to the detail of Rules
|[PIB A4.4.1] to [PIB A4.4.7] in respect of determining the maturity of commitments where they have been renegotiated or are linked commitments.
||OTC derivative contracts
||The calculation of the Credit Equivalent Amount is set out in PIB Rule A4.5.12. Authorised Firms are referred to the table in
|[PIB Rule A4.5.14] which sets out the calculation of Potential Future Credit Exposures with details of how to net them set out in [PIB Rule A4.9.1].
||CRCOM is derived by multiplying the sum of risk weighted assets from the non trading book and exposures arising from OTC derivative contracts in the same book by 8%. The number here is transferred to Form PIB 6, Item No. 6.23.