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December 202Nur-Sultan, Kazak
1.3 Effect of definitions, notes and examples. 1.8 Application of these rules — general 1.9 Application of these rules—branches. 1.10 Requirement for policy also requires procedures and systems. 1.11 Responsibility for principles. CHAPTER 2 Principles relating to Banking Business. 2.1 Principle 1—Capital Adequacy. 2.2 Principle 2—Credit Risk and Problem Assets. 2.3 Principle 3—Transactions with Related Parties. 2.4 Principle 4—Concentration Risk. 2.6 Principle 6—Operational Risk. 2.7 Principle 7— Interest Rate Risk in the Banking Book. 2.8 Principle 8—Liquidity Risk. CHAPTER 3 Prudential Reporting Requirements. 3.2 Information about Financial Group. 3.8 Obligation to notify the AFSA. 4.3 Governing Body’s responsibilities. 4.6 References to particular currencies. Initial and ongoing capital requirements. Section 4A – Capital Requirements and Ratios. 4.8 Required Tier 1 Capital on authorisation. 4.11 Risk-based Capital Requirement Section 4B – Elements of Regulatory Capital 4.14 Common Equity Tier 1 (CET1) Capital 4.15 Criteria for classification as CET1 Capital 4.16 Additional Tier 1 (AT1) Capital 4.17 Criteria for inclusion in AT1 Capital 4.18 Tier 2 Capital (T2 Capital) 4.19 Criteria for inclusion in T2 Capital 4.20 Requirements—loss absorption at point of non-viability. Section 4C – Treatment of Minority interests. 4.22 Criteria for third party interests— CET 1 Capital 4.23 Criteria for third party interests—AT1 Capital 4.24 Criteria for Minority interests— Tier 2 Capital 4.25 Treatment of third party interests from special purpose vehicles. Section 4D Regulatory Adjustments. 4.26 Valuation approaches and related adjustments. 4.27 Definitions for Section 4D. 4.28 Adjustments to CET1 Capital 4.29 Deductions from Regulatory Capital 4.30 Deductions from CET1 Capital 4.31 Capital Conservation Buffer 4.32 Capital conservation ratios. 4.35 The AFSA can require other matters. 4.37 Calculation of Leverage Ratio. CHAPTER 5 Credit Risk and Concentration Risk. 5.1 Credit Risk Management – Systems and Controls. 5.2 Role of Governing Body—Credit Risk. 5.3 Classification of Credit exposures. 5.4 Problem Assets and Impaired Assets. 5.5 Using ratings from External Credit Rating Agencies (ECRAs) 5.6 Calculation of Risk-Weighted Assets (RWAs) 5.7 Calculation of RWAs – for On-Balance Sheet Exposures. 5.9 Risk-weights for unsecured part of claim that is past due for more than 90 days. 5.10 Calculation of RWAs – for Off-Balance Sheet Exposures. 5.11 Credit equivalent amounts for market-related items. 5.12 Calculation of credit equivalent amounts. 5.13 Policies—foreign exchange rollovers. 5.14 Requirements—Credit Risk Mitigation techniques. 5.15 Standard haircuts for Credit Risk Mitigation calculations. 5.17 Eligible financial collateral Risk-weight for cash collateral 5.21 Securitisation and Re-securitisation. 5.22 Provisioning requirements. 5.23 Transactions with related parties. Part II Concentration risk and related matters. 5.26 Management of Concentration risk exposures. 6.1 Market Risk Management – Systems and Controls. 6.3 Switching of positions or instruments between Books. 6.5 Calculation of the Market Risk Capital Requirement 6.6 Foreign Exchange Risk Capital Requirement 6.7 Standard method and use of Internal Models. 7.1 Operational Risk Management Framework and Governance. 7.2 Technology Risk and Business Continuity – Policies. 7.3 Outsourcing risk - Policies. 7.5 Operational Risk Management CHAPTER 8 Interest Rate Risk in the Banking Book. 8.1 IRRBB - Risk Management Framework and Governance. 8.3 IRRBB Management – Processes and Standards. 8.5 Frequency of stress testing. 8.6 IRRBB and Relation to ICAAP. 9.1 Liquidity Risk Management – Systems and Controls. 9.2 Role of Governing Body—Liquidity Risk. 9.3 Role of senior management – Liquidity Risk. 9.5 Liquidity Risk Management – Processes and Procedures. 9.6 Delegation of day-to-day Liquidity Risk Management 9.7 Notification about liquidity concerns. 9.9 Stress-testing and Liquidity Risk tolerance. 9.10 Contingency Funding Plan. 9.11 Relation to Internal Capital Adequacy Assessment Process (ICAAP) 9.12 Liquidity Risk in foreign currency business. 9.13 Management of encumbered assets. 9.14 Consequences of breaches and changes. 9.16 Liquidity Coverage Ratio (LCR) 9.17 Liquidation of assets during periods of stress. 9.18 Notification if LCR Requirement not met 9.19 Net Stable Funding Ratio (NSFR) 9.20 Notification of breach of NSFR Requirement 9.21 The Maturity Mismatch approach. 9.22 Recognition of funding facility from parent entity. 10.1 Financial Group – definition. 10.2 Group Risk – Systems and Controls. 10.3 Financial Group Capital Requirement 10.4 Financial Group Concentration Risk limits. CHAPTER 11 Supervisory Review and Evaluation Processes. 11.1 Application to a Financial Group. 11.2 Internal Capital Adequacy Assessment Process (ICAAP) 11.3 Imposition of an Individual Capital Requirement CHAPTER 12 Public Disclosures Requirements. 12.1 Application to a Financial Group. 12.3 Disclosure frequency, locations and omissions.
The purpose of these Banking Business Rules (BBR) is to establish the prudential framework for Authorised Firms carrying out Banking Business. These rules are based on the Basel Accords and on the Basel Core Principles for Effective Banking Supervision, issued by the Basel Committee on Banking Supervision. These rules commence on 30 July 2018. 1.3 Effect of definitions, notes and examples (1) A definition in the AIFC Glossary also applies to any instructions or document made under these rules. (2) A note in or to these rules is explanatory and is not part of these rules. However, examples and guidance are part of these rules. (3) An example is not exhaustive, and may extend, but does not limit, the meaning of these rules or a provision of these rules to which it relates. (4) Unless the contrary intention appears, a reference in these rules to an accord, principle, standard or other similar instrument is a reference to that instrument as amended from time to time. (1) Banking Business comprises the Regulated Activities of Accepting Deposits, Dealing in Investments as Principal and Providing Credit. An Authorised Firm that has a license from the AFSA to conduct any of those activities is a Banking Business firm. (2) However, an Authorised Firm that is an Islamic Bank or an Islamic Broker dealer or an Islamic Financing Company (as defined in the IBB Rules) is not a Banking Business firm for the purposes of these Rules. (3) A Banking Business firm may be a Bank or a Broker Dealer or a Credit Provider. Guidance A firm that conducts any of the activities that make up Banking Business, or a combination of those activities, will need to consider the extent to which its business model is subject to the prudential requirements set out in these rules. These rules are designed to address the different prudential risks that could arise from the broad range of business models, risk appetites and risk profiles of Banking Business firms. For example, a firm that solely conducts the activity of Dealing in Investments as Principal (that is, a Broker Dealer) will need to consider the extent to which its activities in buying, selling, subscribing to or underwriting investments attract prudential risks that are subject to the requirements of these rules. In contrast, a firm that is a Bank and that also conducts the activity of Dealing in Investments as Principal would be subject to a broader range of prudential requirements. In both examples, these rules apply in accordance with the nature, scale and complexity of the firm’s business. (1) An Authorised Firm is a Bank if it is authorised to conduct the Regulated Activity of Accepting Deposits and/or Opening and Operating Bank Accounts. (2) An Authorised Firm is a Bank even if it is also authorised to conduct any other Regulated Activity or activity. The authorisation for Accepting Deposits and/or Opening and Operating Bank Accounts qualifies an Authorised Firm as a Bank. (1) An Authorised Firm is a Broker Dealer if it is authorised to conduct the Regulated Activity of Dealing in Investments as Principal and it is not a Bank. (2) A Broker Dealer may raise funds from capital markets or money markets using debt instruments of any type but must not accept deposits. (3) An Authorised Firm is a Broker Dealer even if it is also authorised to conduct any other Regulated Activity (except Accepting Deposits). The authorisation for Dealing in investments as a Principal and the absence of an authorisation for Accepting Deposits qualifies an Authorised Firm as a Broker Dealer. (4) An Authorised Firm licensed to conduct the Regulated Activity of Dealing in Investments as Principal on a matched principal basis does not fall under the category of Broker Dealer. Such firms are subject to the AIFC PRU INV Rules and are not subject to the BBR Rules. (1) An Authorised Firm is a Credit Provider if it is authorised to conduct the Regulated Activity of Providing Credit and it is not a Bank. (2) Credit Providers may raise funds from capital markets or money markets using debt instruments of any type but must not accept Deposits. (3) An Authorised Firm is a Credit Provider even if it is also authorised to conduct any Regulated Activity (except Accepting Deposits). The authorisation for Providing Credit and the absence of an authorisation for Accepting Deposits qualifies an Authorised Firm as a Credit Provider. (4) A Credit Provider may conduct the Regulated Activity of Dealing in Investments as Principal, if it receives the necessary authorisation from the AFSA. 1.8 Application of these rules — general (1) Except as stated otherwise, these rules apply to a Person that has, or is applying for, a license to conduct Banking Business, as defined in Rule 1.4(1). (2) Except as stated otherwise, all references to a Bank in the BBR Rules must be read as referring also to Broker Dealers, defined in Rule 1.6 and Credit Providers, defined in Rule 1.7. Consequently, all the regulatory requirements imposed by these BBR Rules apply to all entities licensed to carry out Banking Business as defined in Rule 1.4 (1), except for specific sections or rules wherein their applicability is defined in a particular manner. For clarity, all the regulatory requirements imposed by the BBR Rules apply to Banks, Broker Dealers and Credit Providers as defined in Rules 1.5, 1.6 and 1.7, unless otherwise specified in the BBR. (3) Firms licensed by the AFSA to conduct the Regulated Activities of Advising on a Credit Facility, Arranging a Credit Facility or Providing Money Services are subject only to Base Capital Requirements set out in Rule 4.10. Guidance It is possible for an Authorised Firm to be authorised both as a Bank under these rules and to hold a license to carry on one or more other Regulated Activities defined in Schedule 1 of the AIFC GEN Rules. Both these rules and the relevant rules for those activities could apply to such an Authorised Firm in relation to the activities they are involved in. In relation to such an Authorised Firm, however, the Capital requirements in these rules apply. If that Authorised Firm complies with the Capital requirements in these rules, it is taken to comply with the prudential rule requirements specified in AIFC PRU INV Rules. 1.9 Application of these rules—branches (1) Chapter 4 (Capital adequacy) does not apply to a Bank operating in the form of a branch in the AIFC, in respect of the quantitative capital requirements and related rules specified in Chapter 4. The rules specifying non-quantitative requirements in respect of governance, board responsibilities, policies, systems and controls apply to Banks operating as branches in the AIFC. (2) However, the AFSA may require a branch to have Capital resources or to comply with any other Capital requirement if the AFSA considers it necessary or desirable to do so in the interest of effective supervision of the branch. 1.10 Requirement for policy also requires procedures and systems In these rules, a requirement for a Bank to have a policy also requires such a firm to have the procedures, systems, processes, controls and limits needed to give effect to the policy. 1.11 Responsibility for principles (1) A Bank’s Governing Body is responsible for the firm’s compliance with the principles and requirements set out in these rules. (2) The Governing Body must ensure that the firm’s senior management establishes and implements policies to give effect to these rules. The Governing Body must approve significant policies and any changes to them (other than formal changes) and must ensure that the policies are fully integrated with each other. Note: The significant policies relate to the adequacy of capital and the management of various prudential risks faced by a Bank and group risk, as set out in the following Chapters. (3) The Governing Body must review and appropriately adjust the firm’s policies from time to time, taking into account changed operating circumstances, market conditions, activities and risk profiles. The interval between reviews must be appropriate for the nature, scale and complexity of the Bank’s business, but must not be longer than 12 months. (4) The Governing Body must ensure that the policies are made known to, and understood by, all relevant staff.
CHAPTER 2 Principles relating to Banking Business
2.1 Principle 1—Capital Adequacy A Bank must have capital, of adequate amount and appropriate quality, for the nature, scale and complexity of its business and for its risk profile. A Bank must have appropriate risk management strategies that have been approved by the Bank's Governing Body. The Governing Body of the Bank must set its risk appetite to define the level of risk the Bank is willing to assume. 2.2 Principle 2—Credit Risk and Problem Assets (1) A Bank must have an adequate Credit Risk management policy that takes into account the Bank’s risk tolerance, its risk profile and the market and macroeconomic conditions. This policy must identify, measure, evaluate, monitor, report and control or mitigate Credit Risk in a timely way. (2) A Bank must have adequate policies for the early identification and management of problem assets, and the maintenance of adequate provisions and reserves. 2.3 Principle 3—Transactions with Related Parties A Bank must enter into transactions with related parties on an arm’s-length basis to avoid conflicts of interest. 2.4 Principle 4—Concentration Risk A Bank must have adequate policies to identify, measure, evaluate, manage and control or mitigate concentrations of risk in a timely way. A Bank must have an adequate Market Risk management policy that takes into account the firm’s risk tolerance, its risk profile, the market and macroeconomic conditions and the risk of a significant deterioration in market liquidity. This policy must identify, measure, evaluate, manage and control or mitigate Market Risk in a timely way. 2.6 Principle 6—Operational Risk A Bank must have an adequate operational risk management policy that takes into account the firm’s risk tolerance, its risk profile and market and macroeconomic conditions. This policy must identify, measure, evaluate, manage and control or mitigate operational risk in a timely way. 2.7 Principle 7— Interest Rate Risk in the Banking Book A Bank must have an adequate management policy for Interest Rate Risk in the Banking Book that takes into account the firm’s risk tolerance, its risk profile and the market and macroeconomic conditions. This policy must identify, measure, evaluate, manage and control or mitigate interest rate risk in the Banking Book in a timely way. 2.8 Principle 8—Liquidity Risk A Bank must have prudent and appropriate quantitative and qualitative liquidity requirements. A Bank must also have adequate policies to identify, measure, evaluate, manage and control or mitigate Liquidity Risk in a timely way. A Bank must effectively manage risks arising from its membership in a group.
CHAPTER 3 Prudential Reporting Requirements
(1) This Chapter sets out the prudential reporting requirements for a Bank. (2) The prudential returns of a Bank must reflect its management accounts, financial statements and ancillary reports. A Bank’s prudential returns, accounts, statements and reports must all be prepared using the same standards and practices and must be easily reconcilable with one another. (3) A prudential return is referred to as a Solo prudential return if it reflects the individual Bank’s accounts, statements and reports. (4) A Consolidated prudential return means a prudential return which reflects the accounts, statements and reports of a Bank consolidated with those of the other members of its Financial Group. Note Financial Group is defined in Chapter 10 of BBR and is used for consolidated reporting instead of ‘corporate group’. 3.2 Information about Financial Group If directed by the AFSA, a Bank must give the AFSA the following information about its Financial Group: (a) details about the entities in the group; (b) the structure of the group; (c) how the group is managed; (d) any other information that the AFSA requires. Note The processes and procedures relating to flow of management information, decision-making, oversight, control and review of the operations and activities of the group are collectively referred to as managing the group in (c) above. (1) If a Bank is part of a Financial Group, Credit Risk, market risk, operational risk, Interest Rate Risk in the Banking Book (IRRBB) and liquidity risk exposures (collectively referred to as prudential risk exposures) apply on a consolidated basis to the Bank and the other members that constitute its Financial Group. (2) Preparing returns on a consolidated basis means including the financial effects and risk exposures arising from all the activities of all the members or entities forming part of the Bank’s Financial Group. Such returns are not restricted to just reflecting the financial activities or positions of the Bank. Note: A Bank is required to have systems to enable it to calculate its financial group capital requirement and resources, according to rules in Chapter 10 of the BBR. (1) A Bank must prepare the prudential returns that it is required to prepare by a notice published by the AFSA on its own website. Such a notice may also require Banks to give other information to the AFSA. (2) The Bank must give the return to the AFSA within the period stated in the notice. (3) The AFSA may, by written notice: (a) require a Bank to prepare additional prudential returns; (b) exempt a Bank from a requirement to prepare annual, biannual, quarterly or monthly returns (or a particular return); or (c) extend the period within which to give a return. (4) An exemption may be subject to one or more conditions. The Bank availing the exemption must comply with any condition attached to an exemption. (5) The Bank must prepare and submit its prudential returns in accordance with the AFSA’s instructions. Such instructions may require that the return be prepared or given through an electronic submission system. (6) The instructions may be set out in these rules, in the return itself, in a separate document published by the AFSA on its own approved website or by written notice. These instructions, wherever or however they are given, are collectively referred to as instructions for preparing returns. Note: Instructions may be in the form of formulae or blank spaces that a Bank is expected to use or fill in which would automatically compute the amounts to be reported. (1) The AFSA may, by written notice, require a Bank to provide information in addition to that required under these rules. (2) A Bank must submit the required information to the AFSA in accordance with the AFSA’s instructions and within the period stated in the written notice seeking such information. The AFSA may extend the period for the submission of such information. (3) The AFSA may exempt a Bank from giving information. The Bank must comply with any conditions attached to such an exemption. A Bank must prepare and maintain its financial accounts and prepare its financial statements in accordance with the International Financial Reporting Standards (IFRS). (1) A prudential return must be signed by 2 individuals, who are Approved Individuals for the Bank and who occupy any of the Controlled Functions of Director, Senior Executive Officer or Finance Officer. The AFSA, by way of a notice, may prescribe acceptable modes of affixing a signature for the prudential returns, including but not limited to electronic signatures. (2) If these Approved Individuals are not available or are unable to sign, the prudential return must be signed by both of the individuals approved to exercise the following Controlled Functions: (a) the Risk Manager function; (b) the Compliance Officer function. 3.8 Obligation to notify the AFSA (1) A Bank must notify the AFSA if it becomes aware, or has reasonable grounds to believe, that the Bank has breached, or is about to breach, a prudential requirement. (2) In particular, the Bank must notify the AFSA as soon as practicable of: (a) any breach or potential breach of its minimum capital requirement; (b) any concern it has about its solvency or capital adequacy position; (c) any indication of significant adverse change in the market price of, or trading volume of, the equity capital or other capital instruments of the Bank or those of its Financial Group (including pressure on the Bank to purchase its own equity or debt); (d) any other significant adverse change in its capital; and (e) any significant departure from its Internal Capital Adequacy Assessment Process (ICAAP). (3) The Bank must also notify the AFSA of any measures planned or taken to deal with any real or potential breach or concerns related to its solvency or capital adequacy position.
(1) This Chapter sets out capital adequacy requirements for a Bank. (2) A Bank’s total Regulatory Capital is the sum of its Tier 1 Capital and Tier 2 Capital. The categories and elements of Regulatory Capital, as well as the limits, restrictions and adjustments to which they are subject are set out in this Chapter. (3) Capital adequacy and capital management must be an integral part of a Bank’s overall governance and its bank-wide risk management process. Capital management must align the Bank’s risk appetite and risk profile with its capacity to absorb losses. (1) This Chapter does not apply to a Bank that is licensed to operate as a branch in the AIFC, insofar as this Chapter would require the branch to hold capital. (2) A branch is required to comply with the reporting requirements under this Chapter. In relation to the branch’s ICAAP, the branch may rely on the ICAAP for the bank of which it is a part (if available), to demonstrate compliance. 4.3 Governing Body’s responsibilities (1) A Bank’s Governing Body must consider, on a periodic basis, whether the minimum capital and liquidity resources required by these rules are adequate to ensure there is no significant risk that the Bank’s liabilities cannot be met as they fall due. The Bank must take material and effective measures to obtain additional capital and liquidity resources if its Governing Body considers that the minimum requirements defined in these rules do not adequately reflect the risks of its business. (2) The Governing Body is also responsible for: (a) ensuring that capital management is part of the Bank’s bank-wide risk management framework and is aligned with its risk appetite and risk profile; (b) ensuring that the Bank has, at all times, capital and liquidity resources of the kinds and amounts required by these rules; (c) ensuring that the Bank has capital, of adequate amount and appropriate quality, for the nature, scale and complexity of its business and for its risk profile; (d) ensuring that the amount of capital it has exceeds its minimum capital requirement, calculated according to these rules; (e) reviewing the Bank’s annual ICAAP and approving it, including but not limited to taking decisions to raise additional capital for the Bank; and (f) monitoring the adequacy and appropriateness of the Bank’s systems and controls to ensure the Bank’s compliance with these rules. (1) A Bank must have adequate systems and controls to allow it to calculate and monitor its minimum capital requirement. (2) The systems and controls must be documented and must be appropriate for its risk profile and proportionate to the nature, scale and complexity of its business. (3) The systems and controls employed by a Bank must include the ICAAP process which is defined in greater detail in a separate chapter of these rules. (4) The systems and controls must, at all times, enable the Bank to demonstrate its compliance with the rules in this Chapter. (5) The systems and controls of the Bank must enable it to manage available capital in anticipation of events or changes in market conditions. (6) A Bank must have adequate and proportionate contingency plans to maintain or increase its capital in times of stress, whether idiosyncratic or systemic. A Bank must not use its internal models to calculate regulatory capital requirements and assess capital adequacy in accordance with the BBR Rules or to achieve compliance with the BBR Rules, except for the instances permitted by Rule 6.7 for calculation of market risk capital requirements. 4.6 References to particular currencies In these rules, the specification of an amount of money in a particular currency is also taken to specify the equivalent sum in any other currency at the relevant time. Initial and ongoing capital requirements Section 4A – Capital Requirements and Ratios (1) A Bank is required to meet minimum risk-based capital requirements for exposure to Credit Risk, market risk and operational risk, under these rules. The Bank’s capital ratios (consisting of CET 1 ratio, total tier 1 ratio and total capital ratio) are calculated by dividing its Regulatory Capital by total Risk-Weighted Assets (RWAs). (2) Total RWAs of a Bank is the sum of: (a) the Bank’s RWAs for all on-balance-sheet and off-balance-sheet Credit Risk exposures calculated in accordance with the rules in Chapter 5 of BBR; and (b) 12.5 times the sum of the Bank’s market and operational risk capital requirements (to the extent that each of those requirements applies to the Bank) calculated in accordance with the rules in Chapters 6 and 7 of BBR respectively (3) In this Chapter, consolidated Subsidiary, of a Bank, means: (a) a Subsidiary of the Bank; or (b) a Subsidiary of a Subsidiary of the Bank. 4.8 Required Tier 1 Capital on authorisation A Bank must have, at the time of its authorisation and at all times thereafter, Common Equity Tier 1 Capital (CET1 Capital) as defined in Rule 4.14, at least equal to the Base Capital Requirement applicable to it. The AFSA will not grant an authorisation for conducting Banking Business unless it is satisfied that the entity complies with this requirement. (1) A Bank must have at all times, Capital at least equal to the higher of: (a) its Base Capital requirement; and (b) its Risk-based Capital requirement. Note A Bank whose minimum capital requirement is determined by its risk-based capital requirement is subject to the additional requirement to maintain a Capital Conservation Buffer, as defined in Rule 4.31. (2) The amount of Capital that a Bank must have, in accordance with these rules, is its Minimum Capital Requirement. 4.10 Base Capital RequirementThe Base Capital Requirement is: (a) for a Bank — USD 10 million; (b) for a Broker Dealer — USD 500,000; (c) for a Credit Provider – USD 2 million; (d) for an Authorised Firm Arranging Credit Facility – USD 10,000; (e) for an Authorised Firm Advising on Credit Facility – USD 10,000; (f) for an Authorised Firm Providing Money Services – USD 200,000. 4.11 Risk-based Capital Requirement(1) The Risk-based Capital Requirement for a Bank is the sum of: (a) its Credit Risk capital requirement; (b) its Market Risk Capital Requirement; and (c) its Operational Risk Capital Requirement. (2) The Market Risk and Operational Risk Capital Requirements are required to be calculated according to the rules in Chapters 6 and 7 of BBR respectively. (3) The Credit Risk Capital Requirement must be calculated as 8% of the Bank’s risk-weighted on-balance-sheet and off-balance-sheet Credit Risk exposures calculated in accordance with the rules in Chapter 5 of BBR. 4.12 Capital ratios(1) A Bank’s capital adequacy is measured in terms of 3 capital ratios expressed as percentages of its total Risk-Weighted Assets (RWAs). (2) A Bank’s minimum capital ratios are: (a) a CET 1 Capital ratio of 4.5%; (b) a Tier 1 Capital (T1 Capital) ratio of 6%; and (c) a Total Capital ratio of 8%. (3) The AFSA may, if it believes it is prudent to do so, increase any or all of a Bank’s minimum capital ratios. The AFSA will notify the Bank in writing about a higher capital ratio and the timeframe available for the Bank to meet it. (4) A Bank must maintain at all times capital ratios higher than the required minimum levels specified in Rule 4.12 (2). Section 4B – Elements of Regulatory Capital4.13 Total Capital(1) The Total Capital of a Bank is the sum of its Tier 1 (T1) Capital and Tier 2 (T2) Capital. (2) T1 Capital is the sum of a Bank’s Common Equity Tier 1 (CET 1) Capital and Additional Tier 1 (AT1) Capital. T1 Capital is also known as going-concern capital because it is meant to absorb losses while the Bank is viable. (3) T2 Capital is defined in Rule 4.18. T2 Capital is also known as gone-concern capital because it is meant to absorb losses after the Bank ceases to be viable. (4) For these rules, the 3 categories of Regulatory Capital are CET 1 Capital, AT1 Capital and T2 Capital. 4.14 Common Equity Tier 1 (CET1) CapitalCET 1 Capital is the sum of the following elements: (a) common shares issued by the Bank that satisfy the criteria in Rule 4.15 for classification as common shares for regulatory purpose (or the equivalent for legal entities which are not); (b) share premium resulting from the issue of instruments included in CET 1 Capital; (c) retained earnings; (d) accumulated other comprehensive income and other disclosed reserves; (e) common shares, issued by a consolidated Subsidiary of the Bank and held by third parties, that satisfy the criteria in Rule 4.22 for inclusion in CET 1 Capital; (f) regulatory adjustments applied in the calculation of CET 1 Capital in accordance with Rule 4.29. 4.15 Criteria for classification as CET1 CapitalA capital instrument issued by a Bank is eligible for classification as common equity and for inclusion in CET 1 Capital, only if all of the following criteria in sub-rules (1) to (14) below are satisfied: (1) The instrument is the most subordinated claim in case of the liquidation of the Bank. (2) The holder of the instrument is entitled to a claim on the residual assets that is proportional with its share of issued capital, after all senior claims have been repaid in liquidation. The claim must be unlimited and variable and must be neither fixed nor capped. (3) The principal amount of the instrument is perpetual and never repayable except in liquidation. Discretionary repurchases and other discretionary means of reducing capital allowed by law do not constitute repayment. (4) The Bank must not create an expectation at issuance that the instrument will be bought back, redeemed or cancelled. The statutory or contractual terms must not provide anything that might give rise to such an expectation. (5) Distributions are paid out of distributable items of the Bank (including retained earnings) and the amount of distributions: (a) is not tied or linked to the amount paid in at issuance; and (b) is not subject to a contractual cap (except to the extent that a Bank may not pay distributions that exceed the amount of its distributable items). (6) There are no circumstances under which the distributions are obligatory. Non-payment of distributions must not lead to default. (7) Distributions are paid only after all legal and contractual obligations have been met and payments on all more senior capital instruments have been made. There are no preferential distributions to any pre-defined specified parties, including in relation to other CET1 Capital instruments and the terms of the instrument must not provide any preferential rights for payment of distributions. (8) Compared to all the capital instruments issued by the Bank, the instrument must absorb the first and proportionately greatest share of any losses as they occur, and each instrument absorbs losses on a going-concern basis to the same degree as all other CET1 Capital instruments. Note This criterion in (8) above would be considered as fulfilled if the instrument includes a permanent write-down mechanism, as referred in Rule 4.17 (11) and 4.20. (9) The paid-up amount is recognised as equity capital (rather than as a liability) for determining balance-sheet insolvency. (10) The paid-in amount is classified as equity in accordance with the relevant accounting standards. (11) The instrument is directly issued and paid-in, and the Bank has not directly or indirectly funded the purchase of the instrument.
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Содержание CHAPTER 1 General1.1 Introduction.1.2 Commencement1.3 Effect of definitions, notes and examples.1.4 Banking Business firms.1.5 Bank.1.6 Broker Dealer1.7 Credit Provider1.8 Application of these rules — general1.9 Application of these rules—branches.1.10 Requirement for policy also requires procedures and systems.1.11 Responsibility for principles.CHAPTER 2 Principles relating to Banking Business.2.1 Principle 1—Capital Adequacy.2.2 Principle 2—Credit Risk and Problem Assets.2.3 Principle 3—Transactions with Related Parties.2.4 Principle 4—Concentration Risk.2.5 Principle 5—Market Risk.2.6 Principle 6—Operational Risk.2.7 Principle 7— Interest Rate Risk in the Banking Book.2.8 Principle 8—Liquidity Risk.2.9 Principle 9—Group Risk.CHAPTER 3 Prudential Reporting Requirements.3.1 Introduction.3.2 Information about Financial Group.3.3 Financial Group risk.3.4 Preparing returns.3.5 Giving information.3.6 Accounting standards.3.7 Signing returns.3.8 Obligation to notify the AFSA.CHAPTER 4 Capital Adequacy.4.1 Introduction.4.2 Application to branches.4.3 Governing Body’s responsibilities.4.4 Systems and controls.4.5 Use of internal models.4.6 References to particular currencies.Initial and ongoing capital requirements.Section 4A – Capital Requirements and Ratios.4.7 Capital Requirements.4.8 Required Tier 1 Capital on authorisation.4.9 Required ongoing capital4.10 Base Capital Requirement4.11 Risk-based Capital Requirement4.12 Capital ratios.Section 4B – Elements of Regulatory Capital4.13 Total Capital4.14 Common Equity Tier 1 (CET1) Capital4.15 Criteria for classification as CET1 Capital4.16 Additional Tier 1 (AT1) Capital4.17 Criteria for inclusion in AT1 Capital4.18 Tier 2 Capital (T2 Capital)4.19 Criteria for inclusion in T2 Capital4.20 Requirements—loss absorption at point of non-viability.Section 4C – Treatment of Minority interests.4.21 Introduction.4.22 Criteria for third party interests— CET 1 Capital4.23 Criteria for third party interests—AT1 Capital4.24 Criteria for Minority interests— Tier 2 Capital4.25 Treatment of third party interests from special purpose vehicles.Section 4D Regulatory Adjustments.4.26 Valuation approaches and related adjustments.4.27 Definitions for Section 4D.4.28 Adjustments to CET1 Capital4.29 Deductions from Regulatory Capital4.30 Deductions from CET1 CapitalSection 4E Capital Buffers.4.31 Capital Conservation Buffer4.32 Capital conservation ratios.4.33 Powers of the AFSA.4.34 Capital reductions.4.35 The AFSA can require other matters.Section 4F Leverage Ratio.4.36 Application.4.37 Calculation of Leverage Ratio.CHAPTER 5 Credit Risk and Concentration Risk.Part I Credit Risk.5.1 Credit Risk Management – Systems and Controls.5.2 Role of Governing Body—Credit Risk.5.3 Classification of Credit exposures.5.4 Problem Assets and Impaired Assets.5.5 Using ratings from External Credit Rating Agencies (ECRAs)5.6 Calculation of Risk-Weighted Assets (RWAs)5.7 Calculation of RWAs – for On-Balance Sheet Exposures.5.8 Specialised lending.5.9 Risk-weights for unsecured part of claim that is past due for more than 90 days.5.10 Calculation of RWAs – for Off-Balance Sheet Exposures.5.11 Credit equivalent amounts for market-related items.5.12 Calculation of credit equivalent amounts.5.13 Policies—foreign exchange rollovers.Credit Risk Mitigation.5.14 Requirements—Credit Risk Mitigation techniques.5.15 Standard haircuts for Credit Risk Mitigation calculations.5.16 Collateral5.17 Eligible financial collateralRisk-weight for cash collateral5.18 Guarantees.5.19 Credit derivatives.5.20 Netting agreements.5.21 Securitisation and Re-securitisation.5.22 Provisioning requirements.5.23 Transactions with related parties.Part II Concentration risk and related matters.5.24 General5.25 Concentration risk.5.26 Management of Concentration risk exposures.5.27 Powers of the AFSA.CHAPTER 6 Market Risk.6.1 Market Risk Management – Systems and Controls.6.2 Trading Book.6.3 Switching of positions or instruments between Books.6.4 Valuation of positions.6.5 Calculation of the Market Risk Capital Requirement6.6 Foreign Exchange Risk Capital Requirement6.7 Standard method and use of Internal Models.CHAPTER 7 Operational Risk.7.1 Operational Risk Management Framework and Governance.7.2 Technology Risk and Business Continuity – Policies.7.3 Outsourcing risk - Policies.7.4 Powers of the AFSA.7.5 Operational Risk Management7.6 Basic indicator approach.CHAPTER 8 Interest Rate Risk in the Banking Book.8.1 IRRBB - Risk Management Framework and Governance.8.2 Powers of the AFSA.8.3 IRRBB Management – Processes and Standards.8.4 Stress Testing and IRRBB.8.5 Frequency of stress testing.8.6 IRRBB and Relation to ICAAP.CHAPTER 9 Liquidity Risk.9.1 Liquidity Risk Management – Systems and Controls.9.2 Role of Governing Body—Liquidity Risk.9.3 Role of senior management – Liquidity Risk.9.4 Liquidity Risk tolerance.9.5 Liquidity Risk Management – Processes and Procedures.9.6 Delegation of day-to-day Liquidity Risk Management9.7 Notification about liquidity concerns.9.8 Funding Strategy.9.9 Stress-testing and Liquidity Risk tolerance.9.10 Contingency Funding Plan.9.11 Relation to Internal Capital Adequacy Assessment Process (ICAAP)9.12 Liquidity Risk in foreign currency business.9.13 Management of encumbered assets.9.14 Consequences of breaches and changes.9.15 Liquidity Requirements.9.16 Liquidity Coverage Ratio (LCR)9.17 Liquidation of assets during periods of stress.9.18 Notification if LCR Requirement not met9.19 Net Stable Funding Ratio (NSFR)9.20 Notification of breach of NSFR Requirement9.21 The Maturity Mismatch approach.9.22 Recognition of funding facility from parent entity.CHAPTER 10 Group Risk.10.1 Financial Group – definition.10.2 Group Risk – Systems and Controls.10.3 Financial Group Capital Requirement10.4 Financial Group Concentration Risk limits.CHAPTER 11 Supervisory Review and Evaluation Processes.11.1 Application to a Financial Group.11.2 Internal Capital Adequacy Assessment Process (ICAAP)11.3 Imposition of an Individual Capital RequirementCHAPTER 12 Public Disclosures Requirements.12.1 Application to a Financial Group.12.2 Disclosure policy.12.3 Disclosure frequency, locations and omissions. |