Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) issued a consultation paper inviting public feedback on its proposals to revise the “Prudential – Investment, Insurance Intermediation, and Banking” Rulebook (PRU).
They were planned so the proposals would align the PRU requirements more closely with the current regulatory prudential regime developed by the Basel Committee on Banking Supervision (BCBS), which is a global banking framework. This way, the level of risk to which banking creditors are exposed to is reduced.
The consultation paper offers revisions on certain areas of focus like:
- Introduction of capital requirements through implementation of the Countercyclical Capital Buffer, Credit Valuation Adjustment that accounts for the possibility of default by a party, and Central Counterparties Frameworks, which are like stress tests that manage legal, credit, liquidity, operational and other risks.
- Ability of certain capital instruments to absorb losses at the Point of Non-Viability
- Full implementation of the Leverage Ratio floor
- Disclosure of the Leverage Ratio and the Liquidity Coverage Ratio
- Introduction of new reporting requirements, and further miscellaneous amendments that will provide greater clarity to financial institutions operating in ADGM
This is a part of the FSRA’s ongoing efforts & commitment to uphold an internationally recognized, transparent, and robust prudential regime. Public and industry participants must submit their comments by 7 December 2017.
BASEL III was developed by the BCBS and published in 2011 after the global financial crisis. Built on the International Convergence of Capital Measurement and Capital Standards document, it was a response to shortcomings identified in the regulatory prudential regime. Its staggered implementation started in 2013, with its final aspects due for implementation in 2019.