PRU 2.2.20 Guidance for Form PIB 7 — Large Exposures
As per the Glossary, an Exposure, whether in an
The 20 largest exposures should be listed and, if requested, any other exposure that exceeds 10% of the
|7.1||Capital Resources||The capital resources used as the basis for monitoring and controlling large exposures should be calculated in the same way as those used for capital adequacy monitoring, i.e. the sum of allowable Tier 1 and Tier 2 capital less any deductions (as set out in PIB Table 2.6.2) — as per Form PIB6, Item No. 6.58.
The various percentage amounts should be specified in the relevant sections.
|7.2||Twenty Largest Exposures||Include in this table the twenty largest exposures to all types of
Exposures to individual, or groups of closely related,
|A||Counterparty||The identity of a
|B||Connected, Unconnected — Bank, Unconnected — Other, Government||The
(ii) an Unconnected Counterparty or group of
(iii) an Unconnected Counterparty or group of
(iv) Central governments and central banks.
|C||Amount of non-exempt exposure||For exposures arising in the
Exposures should be calculated in accordance with IFRS or AAOFI standards.
For exposures arising in the
This is set out in more detail in Rules PIB A4.8.13 to PIB A4.8.31.
|D||Specific bad debt provision||Include here the amount of specific bad debt provision that may have been made against a particular exposure.|
|E||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:|
|F||Exposure at reporting date after eligible set-offs||Column C less the amounts in Columns D and E.|
|G||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
|H||Amount of this exposure financed by restricted PSIAs.||For
|7.3||Detail of exposures to connected counterparties||This section comprises the disaggregated detail of all connected lending and exposures should be split into different counterparties within the connected group.|
|A||Financial or Non-financial company||An
|B-H||As for Item No. 7.2||As detailed above for the table in for Item No. 7.2.|
|7.4||Ten Largest Exempt Exposures||An
|A||Reason for exemption||The
|B-H||As for Item No.7. 2||As detailed above for the table in for Item No. 7.2.|
Additional detail for Form PIB 7 — Appendix 1 — Largest 25 Exposures arising from Islamic contracts
|Item No.||Contract type||Guidance|
|7A1.1||Musharaka||Report all Musharaka contracts currently outstanding that exceed 10% of the
• Whether the capital has been self financed or provided by PSIA accounts
• The amount of capital redeemed during the period such as in the case of a diminishing Musharaka.
• Any income or loss declared, any provisions being made to the value of the Musharaka and the net value of the investment.
FAS 4 of AAOIFI refers.
|7A1.2||Mudaraba||Report all Mudaraba financing contracts that would qualify as a
|7A1.3||Istisna'a/Parallel Istisna'a||Report all Istisna'a contracts that would qualify as a
|7A1.4||Salam/ Parallel Salam||Report all Salam contracts and Parallel Salam amounts that would qualify as a
|7A1.5||Ijarah/ Ijarah Muntahia Bittamleek||Report all Ijarah assets on the valuation basis set out in FAS 8. Report also, all assets transferred to lessee for consideration or gift including the value of impairment before transfer of legal asset. State total depreciation/ amortisation charge and the net book value. This information is required to be provided for self financed and both forms of PSIA accounts. The data is to be split by the industrial sectors identified in the reporting statement. FAS 8 refers.|
|7.A1.6||Murabaha||Report here all Murabaha exposures that would qualify as a
|PIB 8 — LIQUIDITY MISMATCH
As set out in PIB Rule 6.3.3, an
In accordance with PIB Rule 6.3.4, an
Liquidity reporting in individual currencies
The return should be completed on the basis of all currencies combined. Currencies should be translated into $ at the closing spot mid price on the reporting date and entered in the relevant time band. However, the DFSA may require institutions to provide management information on positions in individual currencies in the event of difficulties either in the individual institution or with the currency in question.
Cashflow versus maturity analysis approach
The policy aim is to ensure that institutions hold sufficient liquid assets to meet their obligations as they fall due and the DFSA has set mismatch guidelines to help secure the policy objective. The Form PIB 8 monitors
Institutions should report both inflows and outflows on the same basis. Therefore, if an institution reports inflows on the cashflow basis out to three months, it should also report outflows on the cashflow basis out to three months.
Items reported on a cashflow basis should include both interest and principal amounts, together with any other income relating to them. Items reported on a maturity basis should be reported at their value on the institution's books. However, any cashflows arising from these items (e.g. interest payments) within the cashflow reporting period should be included in the relevant cashflow periods. Thus cashflows (e.g. interest payments on a loan) arising from items (however reported) should be entered in the relevant cashflow timebands (i.e. those which the institution reports) when they fall due.
Items should be reported net of specific provisions. General provisions should not be recorded on this return.
As set out in PIB Rule A6.2.1, outflows (such as deposits and other liabilities) are to be included according to their earliest possible repayment date. In this context, the earliest repayment date means the first rollover date or the shortest period of notice required to withdraw the funds or to exercise a break clause, where applicable. Inflows (such as loans) are to be entered as occurring on the latest possible repayment date. Purely technical break facilities should be disregarded for fixed term loans. Where the
The time band 'Overdue'should be used to record cashflows where assets or other items giving rise to cashflows are non-performing, poorly performing or there is reasonable doubt about the certainty of receipt of inflows of funds pertaining to them. Where an asset or cashflow previously reported as overdue is contractually rescheduled according to a written agreement, institutions should cease to report these items as 'overdue' and report them according to the new agreed dates for repayment.
The timeband 'Demand (incl next day)' comprises cashflows or asset items due, available or maturing on the next business day after the reporting date. Cashflows arising or assets/liabilities maturing on a non-business day should be reported as taking place on the following business day. Funds callable at one day's notice should be entered as two-day maturity unless notice has been received or given on the reporting date.
Netting of debts and claims
All claims and liabilities should be reported gross.
An asset is considered to be marketable if it meets the requirements as set out in PIB Section A6.3(2) — essentially, these are assets that could be readily converted into cash where necessary. These assets, outlined in Column A, are reported in rows 8.1.1–8.1.10, Highly liquid / marketable assets.
Marketable assets maturing at exactly one month should be reported in the cashflow section of the return.
Where assets have a residual maturity of less than one month, the DFSA recognises that it is not relevant to apply automatically a discount to such assets. In general, these assets should be entered as cashflows in the relevant timebands in rows 8.1.12–8.1.25 and no discount will be applied.
Assets which do not meet the criteria for marketable assets, or which cannot be fitted into the table in PIB Rule A6.3.1(4), are non-marketable assets for the purposes of this return and should be reported in the form according to their residual maturity. This covers for example:
a. Non-investment grade debt instruments (as rated by a recognised credit agency) issued by a Zone 2 issuer;
b Non-investment grade debt instruments (as rated by a recognised credit agency) issued by a non-government Zone 1 issuer;
c. Commercial paper and certificates of deposit that do not meet the definition of marketable assets.
|Highly liquid / marketable assets||As described in detail above.|
|8.1.1||Cash||Holdings of notes and coins.|
|Cen gov't (Z1) sec — 1 yr or less
Cen gov't (Z1) sec — 1–5 yrs
Cen gov't (Z1) sec — over 5 yrs
|Central government (including central government guaranteed) paper and paper eligible for discount at the
|Non gov't sec — 6 mths or less
Non gov't sec — 6 mths–5 yrs
Non gov't sec — over 5 yrs
|Debt instruments that are of investment grade. Only those securities in the reporting institution's ownership, which the institution may freely dispose of at any time with no restrictions, should be recorded. Those assets pledged to another institution or otherwise encumbered should not be included.|
|8.1.8||Other cen gov't debt (active)||Central government (including central government guaranteed) paper and paper eligible for discount at the
|8.1.9||Highly liquid equities||Equities that are eligible for a specific risk weight of 4% or less under the DFSA's Rules regarding the capital requirement for
|8.1.10||Total||Sum of Item Nos. 8.1.1–8.1.9, for Columns B, D, G, H and K. With 8.1.10 K being the overall total amount of marketable assets.|
|8.1.11||Non-marketable securities||Securities which the
|8.1.12||Inter-bank||Inflows arising from placements with other financial institutions. Include the inflows from those entities that would attract a 20% counterparty weighting. Include also that element of committed facilities provided to the
|8.1.13||Intergroup / related||Inflows from counterparties connected to the
|8.1.14||Corporate||Inflows from non-bank, non-connected corporate counterparties. Initial margins held at clearing houses should be entered here according to their residual maturity. Repayments from leases should also be recorded in this line.|
|8.1.15||Govt / public sector — Zone 1||Inflows from central governments, public sector entities, local authorities and central banks in
|8.1.16||Govt / public sector — Zone 2||Inflows from central governments, public sector entities, local authorities and central banks in
|8.1.17||Repos / reverse repos||Include any transactions relating to repos and reverse repos.
|8.1.18||Forward foreign exchange||Cashflows relating to forward purchases of foreign currency, where an exchange of principal is effected at the start or maturity of the swap. The amount received should be entered in the appropriate maturity band.|
|8.1.19||Forward sales and purchases||The cash leg of any forward sales should be treated as an inflow in the timeband corresponding to the date of the forward sale. For forward purchases, where the asset purchased is a marketable asset, the
|8.1.20||Swaps & FRAs||For interest rate and currency swaps, enter the receipts of fixed and floating legs in the cashflow section. For FRAs, enter the marked-to-market receipt in the relevant time period. The amount of receipts should be derived from the contract's present value at yields prevailing at the reporting date.|
|8.1.21||Commodities||Inflows from the sale of commodities held by the
|8.1.22||Trade related letters of credit||Inflows arising from trade related letters of credit.|
|8.1.23||Fees (incl Mudarib)||Report here fees, commissions or other income receivable by the
|8.1.24||Other funding sources||Include here any other funding sources not included elsewhere, according to their cashflows.|
|8.1.25||Total wholesale Inflows||Sum of Item Nos. 8.1.11–8.1.24, Columns E to J with total in Column K and Columns L to N with total in Column O.|
|8.1.26||Total inflows on a cashflow basis
Total on a maturity basis
|Sum of Item No. 8.1.10, Column K + Item Nos. 8.1.11–8.1.24, Columns E to J, with the total in Column K.
Sum of Item Nos. 8.1.11–8.1.24, Columns L to N. with the total in Column O.
|8.2.1||Non-marketable securities||Include here at residual maturity outflows pertaining to maturing securities or debt instruments, which cannot be classified as marketable. Marketable assets maturing within one month at their full marked-to-market value, i.e. undiscounted should also be reported here.|
|8.2.2||Inter-bank Funds||Outflows arising from placements with or from, or repayments of loans to or from, banks. Also include the entire outflows to those entities that would attract a 20% counterparty weighting. Exclude from this item loans to, or placements with, or deposits / placements from, bank entities within the group.|
|8.2.3||Intergroup / related||Outflows of funds to counterparties connected to the reporting institution. Entries should be made in this item rather than any other item in the Wholesale section if any intragroup/connected counterparties are involved.|
|8.2.4||Corporate||Outflows to non-bank, non-connected, corporate counterparties.|
|8.2.5||Govt / public sector — Zone 1||Report funds lent to central governments, public sector entities, local authorities and central banks in
|8.2.6||Govt / public sector — Zone 2||Report funds lent to central governments, public sector entities, local authorities and central banks in
|8.2.7||Repos / reverse repos||Outflows related to repos or reverse repos. Also include any outflows relating to stock borrowing and lending.|
|8.2.8||Forward foreign exchange||Enter any cashflows relating to forward sales of foreign currency, where an exchange of principal is effected at the start or maturity of the swap. The amount paid should be entered in the appropriate maturity band.|
|8.2.9||Forward sales and purchases||For forward sales, the sterling (or euro) equivalent discounted value of the security sold should be recorded as an outflow. The cash leg of any forward purchases should be treated as an outflow in the timeband corresponding to the date of the forward purchase.|
|8.2.10||Swaps & FRAS||For interest rate and currency swaps, enter payments of fixed and floating legs in the cashflow section.
For FRAs, enter the marked-to-market payment in the relevant time period. The amount paid should be derived from the contract's present value at yields prevailing at the reporting date.
|8.2.11||Commodities||Outflows from the purchase of commodities held by the
|8.2.12||Trade related letters of credit||Outflows arising from trade related letters of credit.|
|8.2.13||Dividends, tax & other costs||Outflows arising from dividends, tax etc.|
|8.2.14||Ijarah asset purchases||Outflows for commitments made for the purchase of these assets.|
|8.2.15||Other outflows||Any outflows relating to payments of dividends and tax, or any other outflows that have not previously been reported elsewhere. Also report any outflows relating to settlement accounts, using the trade date plus the settlement period to determine the appropriate timeband.|
|8.2.16||Other off-balance sheet||Any outflows relating to off balance sheet items that have not been reported elsewhere.|
|8.2.17||Total Wholesale Outflows||Sum Item Nos. 8.2.1–8.2.16, Columns E to J with total in Column K and Columns L to N with total in Column O..|
|8.2.18||Total Outflows on a Cashflow basis
Total on a maturity basis
|Sum of Item Nos. 8.2.1–8.2.16, Columns E to J, with the total in Column K.
Sum of Item Nos. 8.2.1–8.2.16, Columns L to N, with the total in Column O.
|8.3||CALCULATION OF LIQUIDITY MISMATCHES|
|8.3.1||Type of business||Denotes business financed by different sorts of assets.|
|8.3.2||Timeband||The timebands for which limits are set: Sight to 8 days and Sight to one month.|
|8.3.3||Total discounted marketable assets||Figure from row Item No. 8.1.10, Column G for S-8 days and Column G plus H for S-1 month.|
|8.3.4||Total standard inflows||Figure from row 8.1.25, column F plus G for S-8 days and Column F plus G plus H for S-1 month.|
|8.3.5||Total standard outflows||Figure from row 8.2.17, column F plus G for S-8 days and Column F plus G plus H for S-1 month.|
|8.3.6||Total relevant deposits||This figure provides the denominator for the mismatch calculation (see Item No. 8.3.7 below):
• For conventional
• For Islamic
• For branches, figure from form PIB 9, item no 9.26.
|8.3.7||Mismatch as a % of total deposits||As set out in Rules PIB 6.3.4 and PIB 6.3.5, the mismatch positions should not exceed -15% or -25% for the sight — 8 days and sight — 1 month timebands respectively.|
Additional Guidance for Islamic Contracts:
|8.1||Inflows||All inflows should be taken as occurring at the last possible contractual repayment date. The treatment of inflows for Islamic contracts are as follows and it is for the authorised institution to determine in which of the categories the inflows should be recorded. In the event of any doubt, the institution should contact its regular supervisory contact at DFSA.|
|Mudaraba||Inflows of capital should be reported at the latest redemption date or as assets maturing at the latest possible redemption date. Profits on Mudaraba should only be reported to the extent that it is being reported at the reporting date.|
|Musharaka||Capital inflows on a normal Musharaka contract should be entered as occurring on the latest possible termination date and in the case of a diminishing Musharaka at the latest redemption date. Inflows on profits should only be entered if it is being distributed at reporting date.|
|Murabaha Receivables||Inflows reported should include instalment payments and related accrued profit at the latest possible repayment date (or assets maturing at such a date).|
|Ijarah/ Ijarah Muntahia Bittamleek||Report all inflows occurring from Ijarah lease rentals at the last possible payment date. Where the lessee has option to purchase the asset either during the duration of the lease or at the end of the contract, the amount to be received should be reported as an inflow at the latest possible exercise date.|
|Salam and Parallel Salam||Enter the amount of inflows as occurring at the latest possible delivery date. If payments are received in the form of instalments (Parallel Salam), only enter the amount of instalments occurring at their latest possible repayment date (or as an asset maturing at the latest repayment date). Enter commodity flows separately in the line market commodities.|
|Istisna'a and Parallel Istisna'a||Inflows should be assumed to occur at the latest possible completion date. If repayment is via instalments, inflows should be on the latest instalment date.|
|8.2||Outflows||All outflows should be taken as occurring at the earliest possible contractual repayment date. In the case of a Liability, assume the outflows to occur at the earliest possible maturity date. For Islamic contracts, outflows should only be recognised when there is already in existence a defined agreement between the parties for a particular
|Salam and Parallel Salam||For Salam transactions enter amount of outflows as additional advances committed at the earliest possible drawdown date.|
|Istisna'a||Outflows on Istisna'a contracts are to be entered as occurring at the earliest possible drawdown date. If drawdown occurs based on percentage completion, the outflows should be assumed to occur at the earliest completion date or as a liability maturing at the earliest completion date.|
|Ijarah||Commitments made for the purchases of assets for Ijarah purposes should be included as outflows at the earliest date committed for the purchase.|
|8.3.6||Total relevant deposits||For self-financed business,
For business financed through PSIAs, the appropriate figure should be derived from the amounts due (akin to deposits) to PSIA account holders.