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PRU 2.2.7 Guidance for Form PIB 2 — Appendix 1 — Detail of Non-Trading Book Assets (self-financed)

Instructional Guidelines

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 of 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 weight category.

Amongst 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 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.

Only enter exposures relating to self financed assets in PIB 2 Appendix 1.

Item No. Item Guidance
2.A1.2.3 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 their entirety.
2.A1.4 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 especially reminded that in the event of any doubt in this area, they should contact the DFSA for clarification.
2.A1.4.7 Other Include all other investments arising from Islamic contracts not referred to above.
2.A1.9 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.
2.A1.9.4 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.
2.A1.9.10 Other commitments Authorised Firms are referred to the detail in 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.
2.A1.12 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 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.
2.A1.13 CRCOM (self) 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.