IBANK (Consequential) Amendments Rules 2015 · 2020. 6. 12. · IBANK means the Islamic Banking...

VZ

Islamic Banking Business Prudential (Consequential) and Miscellaneous Amendments Rules 2015 QFCRA Rules 2015–3

The Board of the Qatar Financial Centre Regulatory Authority makes the

following rules, and gives the following guidance, under the Financial Services

Regulations.

Dated 13 December 2015.

Abdulla Saoud Al-Thani

Chairman

VZ Islamic Banking Business Prudential (Consequential) and

Miscellaneous Amendments Rules 2015

contents 1

Islamic Banking Business Prudential (Consequential) and Miscellaneous Amendments Rules 2015 QFCRA Rules 2015–3

made under the

Financial Services Regulations

Contents

Page

Schedule 1 Consequential amendments arising from Islamic Banking Business Prudential Rules 2015 2

Part 1.1 Anti-Money Laundering and Combating Terrorist Financing Rules 2010 2

Part 1.2 Banking Business Prudential Rules 2014 2

Part 1.3 General Rules 2005 7

Part 1.4 Governance and Controlled Functions Rules 2012 9

Part 1.5 Investment Management and Advisory Rules 2014 9

Part 1.6 Islamic Finance Rules 2005 16

Contents

page

contents 2 Islamic Banking Business Prudential (Consequential) and Miscellaneous Amendments Rules 2015

VZ

Schedule 2 Amendments to Banking Business Prudential Rules 2014 to align with IBANK 17

Schedule 3 Miscellaneous and technical amendments 29

Part 3.1 Anti-Money Laundering and Combating Terrorist Financing (General Insurance) Rules 2012 29

Part 3.2 Banking Business Prudential Rules 2014 30

Part 3.3 Conduct of Business Rules 2007 46

Part 3.4 General Rules 2005 47

Part 3.5 Individuals (Assessment, Training and Competency) Rules 2014 53

Part 3.6 Insurance Business Rules 2006 54

Part 3.7 Interpretation and Application Rules 2005 62

Part 3.8 Islamic Finance Rules 2005 63



page 1

1 Name of rules

These rules are the Islamic Banking Business Prudential

(Consequential) and Miscellaneous Amendments Rules 2015.

2 Commencement

These rules commence on 1 January 2016.

3 Rules amended

These rules amend the Rules in Schedules 1 to 3.

4 Explanatory notes

An explanatory note in these rules is not part of these rules.

Islamic Banking Business Prudential (Consequential) and

Miscellaneous Amendments Rules 2015 VZ

Schedule 1 Consequential amendments arising from Islamic Banking Business Prudential Rules 2015

(see r 3)

Part 1.1 Anti-Money Laundering and Combating Terrorist Financing Rules 2010

[1.1] Glossary, definition of QFC bank

substitute

QFC bank means an authorised firm that is:

(a) a deposit-taker, within the meaning of the Banking Business

Prudential Rules 2014; or

(b) an Islamic bank or Islamic investment dealer, within the

respective meanings of the Islamic Banking Business Prudential

Rules 2015.

Explanatory note

This amendment updates a definition.

Part 1.2 Banking Business Prudential Rules 2014

[1.2] Rule 1.1.4, guidance 1

omit

in relation to its commercial conduct—Conduct of Business Rules 2007

in relation to an Islamic financial manager—Islamic Finance Rules

2005.



page 3

insert

in relation to its commercial conduct—Conduct of Business Rules 2007.

Explanatory note

This amendment and the next remove references to Islamic financial managers (which are now

dealt with in the Islamic Banking Business Prudential Rules 2015 (IBANK)).


omit

(that is, as a deposit-taker, an investment dealer or an Islamic financial manager)

insert

(that is, as a deposit-taker or an investment dealer)

[1.4] Rule 1.3.1 (except guidance)

substitute

1.3.1 Introduction

(1) Banking business comprises the activities of deposit taking,

providing credit facilities and dealing in investments as principal. An

authorised firm that has an authorisation to conduct any of those

activities is a banking business firm.

(2) However, an authorised firm that is an Islamic bank or Islamic

investment dealer (within the respective meanings of the Islamic

Banking Business Prudential Rules 2015) is not a banking business

firm.

Note An authorised firm that is an Islamic bank or Islamic investment dealer

is an Islamic banking business firm—see the Islamic Banking Business

Prudential Rules 2015.

(3) A banking business firm may be a deposit-taker or an investment

dealer.

Explanatory note

This amendment substitutes a new rule that excludes the application of the rules to Islamic

banking business.



[1.5] Rule 1.3.2 (1) (including the note)

substitute

(1) An authorised firm is a deposit-taker if it is authorised to conduct

either or both of the regulated activities of deposit taking and

providing credit facilities.

Explanatory note

This amendment and the next substitute new subrules that do not refer to Islamic financial

management.

[1.6] Rule 1.3.3 (1)

substitute

(1) An authorised firm is an investment dealer if:

(a) it is authorised to conduct the regulated activity of dealing in

investments as principal; and

(b) it is not a deposit-taker.

[1.7] Rule 1.3.4 (including examples)

omit

Explanatory note

This amendment omits a rule applicable only to Islamic financial managers.

[1.8] Rule 2.1.6 (1)

omit

AAOIFI,

Explanatory note

This amendment removes a reference to AAOIFI, which does not issue accounting standards for

conventional banks.

[1.9] Rule 3.2.4 (a)

substitute

(a) for a deposit-taker—QR 35 million; or

Explanatory note

This amendment substitutes a new paragraph that does not refer to Islamic financial management.



page 5

[1.10] Rule 3.2.16 (1) (b)

omit

deposit-taker, investment dealer or Islamic financial manager

insert

deposit-taker or investment dealer

Explanatory note

This amendment removes a reference to Islamic financial managers.

[1.11] Rule 4.5.7 (2)

omit

every 6 months.

insert

a month.

Explanatory note

This amendment increases the frequency of marking collateral to market.

[1.12] Table 4.8.7, items 3 and 5

omit each occurrence of

or Islamic financial manager

Explanatory note

This amendment removes 4 references to Islamic financial managers.

[1.13] Rule 5.3.4 (including guidance)

omit

Explanatory note

This amendment removes a rule applicable only to Islamic financial managers.

[1.14] Rule 6.6.1, note

omit

Explanatory note

This amendment removes a note applicable only to Islamic financial managers.



[1.15] Rule 7.1.7 (4)

omit

Explanatory note

This amendment removes a subrule applicable only to Islamic financial managers.

[1.16] Rule 7.1.7 (5)

omit

deposit-taker, investment dealer or Islamic financial manager,

insert

deposit-taker or investment dealer,

Explanatory note


[1.17] Rule 8.1.1, note

omit

Explanatory note

This amendment removes a note applicable only to Islamic financial managers.

[1.18] Chapter 11

omit

Explanatory note

This amendment removes a Chapter applicable only to Islamic financial managers.

[1.19] Rule 13.1.2 (2), (3) and (4)

omit

Explanatory note

This amendment removes transitional provisions that are no longer required or apply only to

Islamic financial managers.

[1.20] Glossary, definition of customer, paragraph (a)

omit

or Islamic financial manager

Explanatory note




page 7

[1.21] Glossary

omit the following definitions

AAOIFI

IAH

Islamic financial institution

Islamic financial management

Islamic financial manager

profit-sharing investment account (or PSIA)

PSIA

restricted PSIA

unrestricted PSIA

Explanatory note

This amendment removes definitions of terms that are no longer used in BANK.

Part 1.3 General Rules 2005

[1.22] Rule 9.3.2

after

an Islamic financial institution

insert

(other than an Islamic bank or Islamic investment dealer, within the

respective meanings of IBANK)

Explanatory note

This amendment and the next remove the Rules’ application, to certain Islamic financial

institutions, of requirements that are now dealt with in IBANK.

[1.23] Rule 9.5.1 (1) (A) (ii)

substitute

(ii) for Islamic financial business (other than Islamic banking

business or Islamic investment business, within the

respective meanings of IBANK)—AAOIFI;



[1.24] After rule 9.5.1 (1) (C) (via)

insert

(vib) for an authorised firm that is subject to the risk-based

capital requirement in IBANK—in the auditor’s opinion,

the firm has calculated its risk-based capital requirement

in accordance with IBANK;

Explanatory note

This amendment inserts a requirement for a particular auditor’s certification for authorised firms

to which IBANK applies.

[1.25] Schedule 2, after item 9

insert

10 IBANK

10.1 Prudential returns

r 2.1.4 (Preparing returns)

10.2 Shari’a compliance

r 12.1.13 (Firm must give copy of report)

Explanatory note

This amendment inserts references to reporting requirements in IBANK.

[1.26] Schedule 3, after item 13

insert

14 IBANK

14.1 Credit risk mitigation

r 4.6.17 (Capital relief from hedging instruments)

r 4.6.25 (Monitoring and reporting of netting agreements)

14.2 Market risk

r 6.1.7 (Policies—market risk environment)

14.3 Liquidity risk

r 8.1.15 (Management of encumbered assets)

14.4 Compliance with Shari’a

r 12.1.5 (Adequate records to be kept)

r 12.1.12 (Internal Shari’a reviews)



page 9

Explanatory note

This amendment inserts references to record-keeping requirements in IBANK.

[1.27] Glossary

insert

IBANK means the Islamic Banking Business Prudential Rules 2015.

Explanatory note

This amendment inserts a new definition.

Part 1.4 Governance and Controlled Functions Rules 2012


substitute


(a) a deposit-taker, within the meaning of BANK; or


respective meanings of the Islamic Banking Business Prudential

Rules 2015.

Explanatory note


Part 1.5 Investment Management and Advisory Rules 2014

[1.29] Rule 1.1.4

substitute

1.1.3A Declaration of activities as regulated activities

(1) For FSR, article 23 (2), each of the following activities is a regulated

activity:

(a) dealing (as agent) in Islamic investments;



Note Buying, selling, subscribing for or underwriting any Islamic

investment as principal is covered by IBANK.

(b) arranging deals in Islamic investments;

(c) arranging Shari’a-compliant financing facilities;

(d) providing custody services in relation to Islamic investments;

(e) arranging the provision of custody services in relation to Islamic

investments;

(f) managing Islamic investments;

(g) advising on Islamic investments.

(2) Islamic investments means investments through any 1 or more of the

following kinds of Islamic financial contracts mentioned in IBANK,

rule 1.1.6 (b):

(a) musharakah and its variations;

(b) mudarabah and its variations;

(c) any other Islamic financial contract that is recognised by the

firm’s Shari’a supervisory board.

1.1.4 Application of these rules—general

Subject to rule 1.1.5, these rules apply to an entity that has, or is

applying for, an authorisation to conduct any of the following

activities:

(a) dealing in investments (if limited to dealing as agent);

Note Dealing in investments as principal is covered by BANK or

IBANK, as applicable. Dealing in investments includes buying,

selling, subscribing for or underwriting investment.

(b) managing investments;

(c) providing custody services;

(d) operating a collective investment scheme;

(e) providing custody services in relation to a collective investment

scheme;

(f) providing scheme administration (that is, providing scheme

administration in relation to a collective investment scheme);



page 11

(g) arranging deals in investments;

(h) arranging the provision of custody services;

(i) arranging financing facilities;

(j) advising on investments.

Note Each reference to investments in rule 1.1.4 includes Islamic

investments—see the Glossary.

Guidance

1 The following Rules also apply to a firm to which these Rules apply:

if it is a banking business firm, within the meaning given by BANK—

those Rules

if it is an Islamic banking business firm, within the meaning given by

IBANK—those Rules

if it is an Islamic financial institution (but not an Islamic banking

business firm)—ISFI

in relation to its commercial conduct—COND

if it operates a collective investment scheme—COLL

if it operates a private placement scheme—PRIV.

Rules that are of general application (CTRL, INDI, GENE, AML/CFTR and

INAP) also apply.

2 It is possible for a firm both to be authorised as a banking business firm under

BANK (that is, as a deposit-taker or investment dealer) and to hold an

authorisation referred to in rule 1.1.4. Both these rules and BANK would apply

to such a firm to some degree. Similarly, it is possible for a firm to be

authorised as an Islamic banking business firm under IBANK and to hold an

authorisation referred to in rule 1.1.4. (The firm’s authorisation would include

a condition that the whole of its business must be conducted in accordance

with Shari’a.) Both these rules and IBANK would apply to such a firm to some

degree. (It is not possible for a firm to be authorised under both BANK and

IBANK because Islamic windows are not permitted.)

3 For example, a banking business firm that also holds an authorisation referred

to in rule 1.1.4 will need to comply with these rules, except as follows:

Part 3.3 (Minimum capital and liquid assets requirements) does not

apply because compliance with the capital adequacy and liquidity

requirements in BANK or IBANK (as applicable) is taken to be

compliance with Part 3.3.

Part 4.3 (Professional indemnity insurance) would not apply because the

Regulatory Authority considers it unnecessary for a firm that is also



authorised as a banking business firm or an Islamic banking business

firm.

Part 4.1 (Introduction—Chapter 4), Part 4.2 (Risk management) and

Schedule 1 (Guidance about risk management) would not apply if the

firm can demonstrate to the Regulatory Authority’s satisfaction that,

having complied with BANK or IBANK (as applicable), the firm has in

effect addressed all of the risks and other matters that Part 4.2 would

otherwise require it to address.

Explanatory note

This amendment inserts new rules declaring activities in relation to Islamic investments as

regulated activities and providing for the Rules to apply to authorised firms that operate in

compliance with Shari’a.

[1.30] Rule 3.3.1 (2)

substitute

(2) If an INMA firm is also authorised under BANK or IBANK, and the

firm complies with the capital requirements under whichever of those

Rules applies, the firm is taken to comply with this Part.

Explanatory note

This amendment substitutes a subrule including a reference to IBANK.

[1.31] Table 3.3.3

omit

Arranging credit facilities

insert

Arranging financing facilities

Explanatory note

This amendment updates a defined term.

[1.32] Rule 5.1.2 (2), note

omit

arranging credit facilities



page 13

insert

arranging financing facilities

Explanatory note

This amendment updates a defined term.

[1.33] Glossary, definition of advising on investments

substitute

advising on investments includes:

(a) the regulated activity described in FSR, Schedule 3, Part 2,

paragraph 11; and

(b) advising on Islamic investments.

Explanatory note

This amendment and the next 5 substitute new definitions to take account of the Rules’ coverage

of activities in relation to Islamic investments.

[1.34] Glossary, definitions of arranging credit facilities and arranging deals in investments

substitute

arranging deals in investments includes:


paragraph 5; and

(b) arranging deals in Islamic investments.

arranging financing facilities includes:

(a) arranging credit facilities—that is, the regulated activity

described in FSR, Schedule 3, Part 2, paragraph 7; and

(b) arranging Shari’a-compliant financing facilities.

[1.35] Glossary, definition of arranging the provision of custody services

substitute

arranging the provision of custody services includes:


paragraph 9; and



(b) arranging the provision of custody services in relation to Islamic

investments.

[1.36] Glossary, definition of dealing in investments

substitute

dealing in investments includes:


paragraph 4; and

(b) dealing (as agent) in Islamic investments.

[1.37] Glossary, definition of managing investments

substitute

managing investments includes:


paragraph 10; and

(b) managing Islamic investments.

[1.38] Glossary, definition of providing custody services

substitute

providing custody services includes:


paragraph 8; and

(b) providing custody services in relation to Islamic investments.


substitute


(a) a deposit-taker, within the meaning of BANK; or


respective meanings of IBANK.

Explanatory note




page 15

[1.40] Glossary, definition of relevant investments

substitute

relevant investments means:

(a) investments of the following kinds (in each case, within the

meaning given in FSR, Schedule 3, Part 3), and rights in such

investments:

(i) shares;

(ii) debt instruments;

(iii) warrants;

(iv) securities receipts;

(v) units in collective investment schemes;

(vi) options;

(vii) futures;

(viii) contracts for differences; and

(b) Islamic investments and rights in such investments.

Explanatory note

This amendment substitutes a new definition to take account of the Rules’ coverage of activities

in relation to Islamic investments.

[1.41] Glossary

insert

IBANK means the Islamic Banking Business Prudential Rules 2015.

investments includes Islamic investments.

Islamic investments has the meaning given by rule 1.1.3A (2).

Explanatory note

This amendment inserts 3 new definitions to take account of the Rules’ coverage of activities in

relation to Islamic investments.



Part 1.6 Islamic Finance Rules 2005

[1.42] After rule 1.1.2

insert

1.1.3 Application

These rules do not apply to an Islamic bank or an Islamic investment

dealer (within the respective meanings of the Islamic Banking

Business Prudential Rules 2015).

Explanatory note

This amendment removes the application of the rules, to certain Islamic financial institutions, of

requirements that are now dealt with in IBANK.



page 17

Schedule 2 Amendments to Banking Business Prudential Rules 2014 to align with IBANK

(see r 3)

Explanatory note for Schedule 2

The amendments in this Schedule bring requirements in BANK into line with equivalent

requirements in IBANK.

[2.1] Rule 3.2.11 (12)

after

trigger point.

insert

The conversion must be made in accordance with rule 3.2.14.

Explanatory note

This amendment gives detail about the conversion of certain debt instruments into equity.

[2.2] Rule 3.2.34 (2)

omit

if there isn’t enough capital at that category, from the next category

up.

insert

if there is not enough capital at that category, from the next higher

category.

Explanatory note

This amendment substitutes more formal language in accordance with normal drafting practice.

[2.3] Rule 3.3.3 (2), examples 1 and 2

substitute

1 If a firm’s CET 1 capital ratio is 4.5% or more but less than 5.125%, the firm

needs to conserve 100% of its earnings.

2 If a firm’s CET 1 capital ratio is 5.125% or more but less than 5.75%, the firm

needs to conserve 80% of its earnings and must not distribute more than 20%

of those earnings by way of dividends, share buybacks and discretionary bonus

payments.



Explanatory note

This amendment clarifies the examples.

[2.4] After rule 3.3.3 (4)

insert

(5) If the firm is a member of a financial group, the capital conservation

buffer applies at group level.

Explanatory note

This amendment applies certain capital requirements to a firm’s financial group as well as to the

firm itself.

[2.5] Rule 3.3.5 (4), example

omit

Explanatory note

This amendment removes a superfluous example.


omit

, or those solicited from a nominated ECRA

Explanatory note

This amendment and the next 4 clarify the requirements in relation to the use of credit ratings.

[2.7] Rule 4.3.2 (c)

substitute

(c) to rate and risk-weight a counterparty;

[2.8] Rule 4.3.7 (1)

substitute

(1) A banking business firm must use only a solicited credit risk rating

determined by an ECRA in determining the risk-weights for the

firm’s exposures.

[2.9] Rule 4.3.7 (3)

omit

its nominated ECRAs



page 19

insert

an ECRA

[2.10] Rule 4.3.7 (3), example

omit

a nominated ECRA

insert

an ECRA

[2.11] After rule 4.3.7

insert

4.3.7A Multiple assessments

(1) If there is only 1 assessment by an ECRA for a particular claim or

asset, that assessment must be used to determine the risk-weight of

the claim or asset.

(2) If there are 2 assessments by ECRAs and the assessments map into

different risk weights, the higher risk-weight must be applied.

(3) If there are 3 or more assessments with different risk weights, the

assessments corresponding to the 2 lowest risk-weights should be

referred to, and the higher of those 2 risk-weights must be applied.

Explanatory note

This amendment clarifies how ECRA assessments are to be used to determine risk-weights.

[2.12] Rule 4.4.1 (2)

omit

a nominated ECRA

insert

an ECRA

Explanatory note




[2.13] Rule 4.4.4 (3)

omit

its nominated ECRA

insert

an ECRA

[2.14] Rule 4.4.7 (3)

substitute

(3) If column 3 of table 4.4.7A states that the risk weight is “based on

ECRA rating”, the applicable risk-weight for the claim or asset is that

in table 4.4.7B. If a claim or asset’s risk-weight is to be based on the

ECRA rating and there is no such rating from an ECRA, the firm must

apply the risk-weight in the last column of table 4.4.7B.

[2.15] Table 4.4.7A, items 11 and 12

substitute

11 Unsettled and failed transactions—

delivery-versus-payment transactions:

(a) 5 to 15 days 100

(b) 16 to 30 days 625

(c) 31 to 45 days 937.5

(d) 46 or more days 1250

12 Unsettled and failed transactions—

non-delivery-versus-payment transactions

100

Explanatory note

This amendment inserts some words descriptive of the relevant transactions.



page 21

[2.16] Table 4.4.7A, item 15 (column 3)

omit

400

insert

150

Explanatory note

This amendment substitutes a new risk-weight for certain assets.

[2.17] Before table 4.4.7B

insert

Note In table 4.4.7B, the ratings are shown according to Standard & Poor’s

conventions. If a claim or asset is not rated by Standard & Poor’s, its

rating must be mapped to the equivalent Standard & Poor’s rating.

Explanatory note

This amendment inserts a note clarifying the intended operation of the table.

[2.18] Table 4.4.7B, heading

substitute

Table 4.4.7B Risk-weights based on ratings determined by ECRAs

Explanatory note

This amendment clarifies the requirements in relation to the use of credit ratings.

[2.19] Rule 4.5.4 (3) (b)

substitute

(b) the ECRA that determined the rating had taken the technique

into consideration in doing so.

Explanatory note


[2.20] Rule 4.5.7 (1) (c)

omit

the firm’s nominated ECRA,



insert

an ECRA,

[2.21] Rule 4.5.7 (1) (d)

omit

the firm’s nominated ECRA

insert

an ECRA

[2.22] Rule 5.3.1 (2), definition of gross exposure, paragraph (b)

substitute

(b) debt securities held by the firm;

Explanatory note

This amendment corrects a drafting error.

[2.23] Before rule 6.1.1

insert

Division 6.1.A Governing body, trading book and policies

Explanatory note

This amendment inserts a heading reflecting the general nature of rules 6.1.1 to 6.1.10.

[2.24] Rule 6.1.1 (2), note

omit

Explanatory note

This amendment omits a note now considered unnecessary.

[2.25] Rule 6.1.1 (3), paragraphs (a) to (c)

substitute

(a) foreign exchange risk in the banking book and trading book;

(b) options risk in the banking book and trading book;

(c) commodities risk in the banking book and trading book;



page 23

Explanatory note

This amendment clarifies what is included in the calculation of a firm’s market risk capital

requirement.

[2.26] After rule 6.1.7 (1)

insert

(1A) In particular, the firm must have policies on:

(a) what to include, or not to include, in the trading book;

(b) managing and reporting trading positions;

(c) valuing positions, including:

(i) clearly defined responsibilities of staff involved in the

valuation;

(ii) sources of market information, and review of their

reliability;

(iii) frequency of independent valuations;

(iv) timing of closing prices;

(v) procedures for adjusting valuations between periods;

(vi) ad-hoc verification procedures; and

(vii) reporting lines for the valuation function that are

independent of that function that gave rise to the position.

Explanatory note

This amendment provides detail about the operation of the rule.

[2.27] Rule 6.1.11

substitute

Division 6.1.B Measurement of risk and valuation of positions

6.1.11 Valuing positions—mark-to-market

(1) A banking business firm must use the mark-to-market method to

value its positions and exposures if there is a market to mark the



positions and exposures to. Mark-to-market means a valuation that is

based on current market value.

Guidance

1 The Regulatory Authority would expect a banking business firm to mark-to-

market listed securities since there is a market with observable and reliable

prices for such securities.

2 The firm should mark-to-market as much as possible. It should use the prudent

side of bid or offer unless the firm is a significant market maker that can close

at mid-market.

3 When estimating fair value, the firm should maximise the use of relevant

observable inputs and avoid the use of unobservable inputs.

(2) A position that is marked-to-market must be revalued daily, based on

independently sourced current market prices.

6.1.12 Valuing positions—mark-to-model

(1) If it is not possible to mark-to-market (for example, in the case of

unlisted securities or where the market is inactive), a banking

business firm may use the mark-to-model method to value its

positions and exposures. Mark-to-model means a valuation that has

to be benchmarked, extrapolated or otherwise calculated from a

market input.

(2) The firm must be able to demonstrate that its marking-to-model is

prudent.

Guidance

A banking business firm should be extra conservative when marking-to-model. The

Regulatory Authority will take into account the following in deciding if the firm’s

model is prudent:

whether senior management is aware of the positions and exposures that are

marked to model and whether it understands the uncertainty this might create

in reporting the risk or performance of the business

the extent to which market inputs are sourced from market prices

the appropriateness of the assumptions used by the firm

the availability of generally accepted valuation methods for particular products

who developed the model

whether the firm holds a secure copy of the model

the existence of formal control procedures for changing the model



page 25

how often the model is used to check valuations

how aware is the firm’s risk management function of the weaknesses of the

model and how those weaknesses are reflected in the valuation output

the results of comparisons between actual close out values and model outputs

the firm’s procedures for reviewing the model.

6.1.13 Independent price verification

A banking business firm must independently verify market prices and

model inputs, to check that those prices and inputs are accurate. The

verification must be done at least once a month.

Guidance

1 Independent price verification is different from daily mark-to-market. The

object of the verification is to regularly check the accuracy of market prices or

model inputs and, thereby, eliminate inaccurate daily marks. The verification

should be carried out by a unit independent of whoever marked the positions

or exposures.

2 The independent marking in the verification process should reveal any error

or bias in pricing. It entails a higher standard of accuracy in that the market

prices or model inputs are used to determine profit and loss figures, whereas

daily marks are used primarily for management reporting in between reporting

dates.

6.1.14 Valuation adjustments

(1) A banking business firm must consider making adjustments for

positions that cannot be prudently valued (such as those that have

become concentrated, less liquid or stale). For example, valuation

adjustment would be appropriate if pricing sources are more

subjective (such as when there is only one available broker quote).

(2) The firm must establish and maintain procedures for considering

valuation adjustments. This rule applies whether:

(a) the firm uses the mark-to-market or mark-to-model method; and

(b) whether the valuation is done by the firm itself or a third party.

(3) The firm must consider the following valuation adjustments:

(a) unearned profit;

(b) close-out costs;



(c) operational risks;

(d) early termination;

(e) investing and funding costs;

(f) future administrative costs;

(g) model risk, if relevant;

(h) any other adjustment that the firm considers appropriate.

Explanatory note

This amendment provides detail on how a firm’s positions should be valued.

[2.28] Rule 6.2.2 (1) (d)

substitute

(d) any other items representing an exposure to risk in foreign

currencies (for example, a specific provision held in the

currency in question where the underlying asset is held in a

different currency).

Explanatory note

This amendment clarifies the intended meaning of the paragraph.

[2.29] Part 6.3, heading

substitute

Part 6.3 Options risk Explanatory note

This amendment ensures that the heading accurately reflects the content of the Part.

[2.30] Rule 6.3.4 (1) (except guidance)

substitute

(1) For a position that is ‘long cash and long put’ or ‘short cash and long

call’, the capital charge is calculated by multiplying the market value

of the underlying security by the sum of the specific and general risk



page 27

capital charges for the underlying, and then subtracting the amount

by which the option is in-the-money (bounded at zero).

Explanatory note

This amendment clarifies the intended meaning of the subrule.

[2.31] Rule 6.6.4 (3)

omit

table 6.6.4,

insert

table 6.6.4:

Explanatory note

This amendment corrects a minor punctuation error.

[2.32] Rule 6.6.5 (2)

omit

(2) Futures and forward contracts are exempt from specific risk capital

charge if:

insert

(2) Futures and forward contracts (other than those mentioned in

subrule (1)) are exempt from specific risk capital charge if:

Explanatory note

This amendment clarifies the intended operation of the rule.

[2.33] Rule 7.1.7 (5) (a)

substitute

(a) realised profits from the sale of securities in the banking book;

(aa) realised profits from securities in the ‘Held to Maturity’

category in the banking book;

Explanatory note

This amendment clarifies the kinds of realised profits excluded from a firm’s gross income for

the purposes of the rule.



[2.34] Rule 10.2.3 (excluding examples)

substitute

10.2.3 Solo limits to apply to group

Unless the Regulatory Authority directs otherwise, a prudential limit

in these rules that applies to a banking business firm also applies to

the firm’s financial group.

Explanatory note

This amendment removes an unnecessary restriction on the interpretation of prudential limits.

[2.35] Glossary, definition of external credit rating agency, paragraphs (d) and (e)

substitute

(d) a rating agency that is affiliated with one of the agencies

mentioned in paragraphs (a) to (c);

(e) Islamic International Rating Agency, B.S.C; and

(f) any other agency approved by the Regulatory Authority.

Explanatory note




page 29

Schedule 3 Miscellaneous and technical amendments

(see r 3)

Part 3.1 Anti-Money Laundering and Combating Terrorist Financing (General Insurance) Rules 2012

[3.1] Rule 1.3.1 (including the note)

omit

QFC

insert

QFC

Explanatory note

This amendment and the next omit unnecessary italics.

[3.2] Glossary, definition of this jurisdiction

omit

QFC

insert

QFC

[3.3] Glossary

insert

QFC means Qatar Financial Centre.

Explanatory note

This amendment inserts a definition of a term used in the Rules but not defined in them.



Part 3.2 Banking Business Prudential Rules 2014

[3.4] Rule 1.1.5 (1)

omit

banking business firm that is branch

insert

banking business firm that is a branch

Explanatory note

This amendment corrects a typographical error.

[3.5] Rule 1.3.5 (except the note)

substitute

1.3.5 Legal form that firms must take

(1) A deposit-taker must be:

(a) a limited liability company incorporated under the Companies

Regulations 2005; or

(b) a branch registered with the QFC Companies Registration

Office.

(2) An investment dealer must be:

(a) a limited liability company incorporated under the Companies

Regulations 2005;

(b) a branch registered with the QFC Companies Registration

Office; or

(c) a limited liability partnership incorporated under the Limited

Liability Partnerships Regulations 2005.

Explanatory note

This amendment clarifies the intended effect of the rule.



page 31

[3.6] Rule 2.1.2, guidance

omit

Explanatory note

This amendment removes guidance now considered unnecessary.

[3.7] Rule 3.1.3 (2) (b), note

substitute

Note Financial resources is a broader concept than capital resources.

Financial resources could include liquid assets (such as cash in

hand), irrevocable lines of credit and irrevocable guarantees.

Explanatory note

This amendment clarifies the note.

[3.8] Rule 3.2.8, note

omit

interim profit or loss.

insert

appropriated profit or loss.

Explanatory note

This amendment corrects a minor drafting error.

[3.9] Rule 3.2.9 (7)

after

Non-payment

insert

of distributions

Explanatory note

This amendment clarifies the intended meaning of the rule.

[3.10] Rule 3.2.11 (1)

omit

issued by a banking business firm



Explanatory note

This amendment clarifies the intended operation of the rule, which also applies to certain

instruments not issued by the firm itself.

[3.11] Rule 3.2.11 (16) (except the note)

substitute

(16) If the instrument is issued by a special purpose vehicle, the proceeds

are immediately available without limitation to the firm through an

instrument that satisfies the other criteria for additional tier 1 capital.

Explanatory note

This amendment clarifies the intended operation of the subrule, which applies to certain


[3.12] Rule 3.2.12 (e)

after

risk-weighted assets

insert

for credit risk,

Explanatory note


[3.13] Rule 3.2.13 (1)

omit

issued by a banking business firm

Explanatory note

This amendment clarifies the intended operation of the rule, which also applies to certain



substitute

(11) If the instrument is issued by a special purpose vehicle, the proceeds

are immediately available without limitation to the firm through an

instrument that satisfies the other criteria for tier 2 capital.



page 33

Explanatory note

This amendment clarifies the intended operation of the subrule, which applies to certain

instruments not issued by the firm itself..

[3.15] Rule 3.2.24, note

omit

(threshold deduction rule).

insert

(Deductions from common equity tier 1 capital).

Explanatory note

This amendment and the next correct cross-references.

[3.16] Rule 3.2.25 (2), note

omit

(threshold deduction rule).

insert


[3.17] Rule 3.2.37 (2)

omit

shares or other instruments that qualify as capital of an entity

concerned.

insert

shares, or other instruments that qualify as capital, of an entity

concerned.

Explanatory note

This amendment clarifies the meaning of the provision.

[3.18] Rule 3.2.37 (4)

omit

5 working days

insert

5 business days



Explanatory note

This amendment and the next correct minor drafting errors.

[3.19] Rule 3.2.37 (5)

omit

CET 1.

insert

CET 1 capital.


substitute

(2) A banking business firm must deduct the total amount of investments

in the entity concerned (other than investments in common shares, or

other instruments that qualify as CET 1 capital, of the entity).

Note For the treatment of investments in common shares, or other instruments

that qualify as CET 1 capital, of an entity concerned, see rule 3.2.41


Explanatory note


[3.21] Rule 3.2.39 (4)

omit

5 working days

insert

5 business days

Explanatory note


[3.22] Rule 3.2.39 (5)

omit

CET 1.

insert

CET 1 capital.



page 35

Explanatory note


[3.23] Rule 3.2.40 (1)

omit

concerned entities

insert

entities concerned

[3.24] Rule 3.2.41 (2) (a)

omit

common shares or other instruments that qualify as CET 1 capital of

an unconsolidated entity concerned;

insert

common shares, or other instruments that qualify as CET 1 capital, of

an unconsolidated entity concerned;

Explanatory note


[3.25] Rule 3.3.1 (3)

substitute

(3) The counter-cyclical capital buffer is a macroprudential tool that can

be used to mitigate the build-up of a system-wide risk such as excess

aggregate credit growth. It is intended to ensure that the banking

system has a buffer of capital to protect it against future potential

losses.

Explanatory note

This amendment clarifies the meaning of the subrule.

[3.26] Rule 3.3.5 (1)

omit

associated with



insert

such as

Explanatory note


[3.27] Rule 4.2.2 (d) (i)

omit

continuous

insert

regular

Explanatory note


[3.28] Table 4.4.7A, items 3 and 4

substitute

3 claims on public sector enterprises:

(a) claims on non-commercial public sector

enterprises in Qatar

0

(b) claims on non-commercial public sector

enterprises in other GCC countries,

denominated in the relevant enterprise’s

domestic currency

0

(c) claims on non-commercial public sector

enterprises in other GCC countries, not

denominated in the relevant enterprise’s

domestic currency

based on

ECRA rating

(d) claims on other sovereign non-

commercial public sector enterprises

based on

ECRA rating

(e) claims on commercial public sector

enterprises

based on

ECRA rating



page 37

4 claims on multilateral development banks:

(a) claims on multilateral development banks

eligible for 0% risk-weight

0

(b) claims on other multilateral development

banks

based on

ECRA rating

Explanatory note

This amendment clarifies the intended meaning of the items.

[3.29] Table 4.4.7B, item 2

substitute

2 claims on

non-

commercial

public sector

enterprises in

other GCC

countries, not

denominated

in the relevant

enterprise’s

domestic

currency

0 20 50 100 100 150 100

Explanatory note

This amendment clarifies the intended meaning of the item.

[3.30] Rule 4.5.5 (1)

omit

tables 4.5.5A and 4.5.5B

insert

this rule

Explanatory note

This amendment is consequential on other changes to the rule.



[3.31] Table 4.5.5A, items 3 and 4

substitute

3 BB+ to BB-

(long-term)

All 15 Not

applicable

4 securities

issued by the

State of Qatar

or the Qatar

Central Bank

≤1 year 1 Not

applicable

>1 year,

≤5 years

3 Not

applicable

>5 years 6 Not

applicable

Note Table 4.5.5A item 3, column 5: securities rated BB+ or below are eligible

financial collateral only if issued by a sovereign or non-commercial

public sector enterprise—see rule 4.5.7 (1) (c) (i).

Explanatory note

This amendment clarifies the meaning of the table by specifying cases where it does not apply.

[3.32] Table 4.5.5B, heading and column headings

substitute

Table 4.5.5B Haircuts for other assets

column 1

item

column 2

description of assets

column 3

haircut

%

Explanatory note

This amendment inserts headings that more accurately reflect the purpose of the table.

[3.33] Table 4.5.5B, item 5

omit

Explanatory note

This amendment omits an unnecessary item.



page 39

[3.34] Rule 4.5.5 (3) and (4)

substitute

(3) If a CRM technique (other than a guarantee) and the exposure covered

by it are denominated in different currencies (that is, there is a

currency mismatch between them), the haircut that applies is:

(a) if the mismatched currencies are both pegged to the same

reference currency, or 1 of them is pegged to the other—0; or

(b) in any other case—8%.

(4) If there is a currency mismatch between a guarantee and the exposure

covered by it, the amount of the exposure that is covered must be

reduced using the following formula:

HfxG 1

where:

G is the nominal amount of the guarantee.

Hfx is the haircut appropriate for the currency mismatch between the

credit protection and the underlying obligation, as follows:

(a) if the guarantee is revalued every 10 business days—8%;

(b) if the guarantee is revalued at any longer interval—the factor H

calculated using the formula in subrule (5); or

(c) if the mismatched currencies are both pegged to the same

reference currency, or if 1 of them is pegged to the other—0.

(5) If the guarantee is revalued at intervals longer than 10 business days,

the 8% haircut must be scaled up using the following formula:

10

98 NH

where:

H is the scaled-up haircut.

N is the number of business days between the revaluations.

Explanatory note

This amendment clarifies the intended meaning of the subrules.



[3.35] Rule 4.5.12 (1) (b) (i)

omit

sovereign securities;

insert

sovereign securities that are eligible for zero per cent risk-

weight;

Explanatory note



substitute

2 The method and frequency of monitoring and revaluation depend on the nature

and condition of the collateral (see rule 4.5.7 (2)). For example, securities

accepted as collateral are usually marked to market daily.

Explanatory note


[3.37] Rule 4.7.1

omit

expected loss

insert

expected losses

Explanatory note


[3.38] Rule 4.7.3 (3)

after

that in total

insert

at least

Explanatory note




page 41

[3.39] Table 4.7.3, column headings

substitute

column 1 item

column 2 category

column 3 minimum provisioning requirement (% of the unsecured part of the credit)

Explanatory note

This amendment substitutes new column headings to conform with rule 4.7.3 (3), as amended.

[3.40] Chapter 5 (heading)

substitute

Chapter 5 Concentration risk and related matters

Explanatory note

This amendment substitutes a new heading better reflecting the content of the Chapter.

[3.41] Part 5.3 (heading)

substitute

Part 5.3 Management of exposures Explanatory note

This amendment substitutes a new heading better reflecting the content of the Part.

[3.42] Rule 5.3.1 (heading)

substitute

5.3.1 Calculating exposures

Explanatory note

This amendment substitutes a new heading better reflecting the content of the rule.

[3.43] Rule 5.3.1 (3) (a)

substitute

(a) the outstanding balances of all loans and advances, including

balances with other banks;



Explanatory note

This amendment and the next clarify the intended meaning of the subrule.

[3.44] Rule 5.3.1 (3) (c)

substitute

(c) unused off-balance-sheet commitments, whether revocable or

irrevocable; and

[3.45] Rule 5.3.1 (4)

substitute

(4) However, in calculating the gross exposure, do not include:

(a) claims, equity investments and other exposures deducted from

the firm’s capital;

(b) exposures arising in the course of settlement of market-related

contracts; and

(c) exposures that have been written off.

(5) For this Part:

(a) a banking business firm must treat an exposure as reduced (to

the extent permitted by Part 4.5) by any applicable CRM

technique; and

(b) a banking business firm that is part of a financial group may

offset intragroup amounts due to other deposit takers within the

group.

Explanatory note

This amendment clarifies the intended meaning of the subrule.

[3.46] Rule 5.3.3 (heading)

substitute

5.3.3 Limits on exposures

Explanatory note

This amendment substitutes a heading that more accurately reflects the substance of the rule after

other amendments.



page 43


substitute

(2) The total of the firm’s net exposures to any 1 counterparty or any

1 group of connected counterparties must not exceed 25% of the

firm’s regulatory capital.

(2A) The total of all of the firm’s net large exposures must not exceed

800% of that capital.

Note Subrules (2) and (2A) do not apply to a branch. A branch is not required

to hold regulatory capital—see rule 3.1.2 (1).

Explanatory note

This amendment clarifies the intended meaning of the former subrule.

[3.48] Rule 6.1.4 (2) (a)

omit

trading book; or

insert

trading book; and

Explanatory note

This amendment corrects a drafting error.

[3.49] Rule 6.1.4 (6)

omit

The value of a position in an investment is the investment’s quoted

price.

Explanatory note

This amendment omits some words now considered unnecessary.

[3.50] Rule 6.1.7 (3)

omit

A banking business firm that is required to have a trading book



insert

The firm

Explanatory note

This amendment omits some unnecessary words.

[3.51] Rule 6.2.3 (1)

substitute

(1) If a banking business firm is assessing its foreign exchange risk on a

consolidated basis, and the inclusion of the currency positions of a

marginal operation of the firm is technically impractical, the firm may

use, as a proxy for those positions, the internal limit in each currency

that the firm applies to the operation. Marginal operation, in relation

to a firm, is an operation that accounts for less than 5% of the firm’s

total currency positions.

Explanatory note

This amendment clarifies the intended effect of the subrule.

[3.52] Rule 6.4.2 (3) (a) and (b)

substitute

(a) the commodities are deliverable against each other; or

(b) the commodities are close substitutes for each other and a

minimum correlation between price movements of 0.9 can be

clearly established over at least the preceding year.

Explanatory note

This amendment clarifies the intended effect of the subrule.

[3.53] Rule 9.1.5 (2) (c) (iii)

omit

active;

insert

active; and

Explanatory note




page 45

[3.54] Rule 9.1.11 (1) (b)

omit

particular currency.

insert

particular foreign currency.

Explanatory note


[3.55] Rule 9.1.11 (2)

omit

business in a foreign currency is significant,

insert

business in a currency is significant,

Explanatory note


[3.56] Rule 10.2.3, examples

substitute

Examples

1 The restriction in rule 5.3.3 (2) (that the total of a banking business firm’s net

exposures to a counterparty or connected counterparties must not exceed 25%

of its regulatory capital) applies to the firm’s financial group, so that the

group’s net exposures to a counterparty or connected counterparties must not

exceed 25% of the group’s regulatory capital.

2 Similarly, the restriction in rule 5.3.3 (2A) (that the total of all of the firm’s

net large exposures must not exceed 800% of its regulatory capital) applies to

the firm’s financial group, so that the group’s total net large exposures to

counterparties or connected counterparties must not exceed 800% of the

group’s regulatory capital.

Explanatory note

This amendment updates the examples consequent to other amendments.

[3.57] Glossary, definition of home jurisdiction

omit

granted



insert

granted.

Explanatory note

This amendment inserts missing punctuation.

Part 3.3 Conduct of Business Rules 2007

[3.58] Rule 2.2.1 (2)

after

of the firm

insert

(or of a related firm)

Explanatory note

This amendment and the next allow employees of another member of an authorised firm’s group

to perform the customer-facing function for the firm.

[3.59] Rule 2.2.2 (2) (a)

after

of the firm

insert

(or of a related firm)

[3.60] Table 4.3.17, first column header

omit

QR

Explanatory note

This amendment removes an unnecessary use of “QR” in the year column.



page 47

Part 3.4 General Rules 2005

[3.61] Rule 5.3.2 (4) (d) (ii)

omit

in accordance rule

insert

in accordance with rule

Explanatory note

This amendment inserts a missing word.

[3.62] Rule 5.3.3 (4) (b) (v)

omit

otherwise

insert

is otherwise

Explanatory note


[3.63] Rule 8.3.2 (1) (c)

omit

or less;

insert

or less; or

Explanatory note


[3.64] Rule 9.3.1

omit

such

Explanatory note

This amendment corrects a minor grammatical error.



[3.65] Rule 9.3.2

omit

AAOIFI.

insert

AAOIFI or any other accounting standards approved in writing by the

Regulatory Authority.

Explanatory note

This amendment allows for firms to use other approved accounting standards.

[3.66] Rule 9.4.1

omit

four months

insert

3 months

Explanatory note

This amendment amends the period within which an authorised firm’s financial records must be

audited.


omit

QFC entity

Explanatory note

This amendment removes a heading that does not conform to current practice. A heading in

accordance with current practice is inserted by a later amendment.

[3.68] Rule 9.6.1

omit

which is QFC entity

insert

which is a QFC entity

Explanatory note

This amendment corrects a minor grammatical error.



page 49


omit

Non–QFC entity

Explanatory note

This amendment removes a heading that does not conform to current practice. A heading in

accordance with current practice is inserted by a later amendment.

[3.70] Rule 10.2.2

omit

for each month, or part of a month,

insert

for each month, or part of a month,

Explanatory note

This amendment removes unnecessary italics.

[3.71] Before rule A4.4.1

omit

Initial Annual Fee

Explanatory note

This amendment and the next 2 remove headings that do not conform to current practice.

Headings in accordance with current practice are inserted by later amendments.


omit

Subsequent Annual Fees


omit

Provision of Extracts of Information from the Registers of Public Information



[3.74] Glossary

insert

AAOIFI means the Accounting and Auditing Organisation for

Islamic Financial Institutions.

ISFI means the Islamic Finance Rules 2005.

Islamic financial business means the business of carrying on 1 or

more regulated activities in accordance with Shari’a.

Islamic financial institution has the meaning given by ISFI,

rule 1.2.2.

Islamic window has the meaning given by ISFI, rule 8.1.1.

month means calendar month—that is, the period beginning at the

start of any day of one of the 12 named months of the year and ending:

(a) at the end of the day before the corresponding day on the next

named month; or

(b) if there is no corresponding day—at the end of the last day of

next named month.

Explanatory note

This amendment inserts a definition of a term used in the rules but not previously defined in them.

[3.75] Other minor amendments—italics and capitalisation

amendments in accordance with the following table

Provision omit insert

Rule 9.3.1 Rules 9.3.2 and 9.3.3, rules 9.3.2 and 9.3.3,

Rule 9.3.2 Islamic financial

institution

Islamic financial

institution

Rule 9.3.3 Islamic window Islamic window

Rule 9.3.3 AAOIFI AAOIFI

Rule 9.3.3 Islamic financial business Islamic financial

business

Rule 9.3.3, guidance AAOIFI AAOIFI



page 51


Rule 9.3.3, guidance Islamic financial business Islamic financial

business

Rule 9.5.1 (1) (A) (i)

and (ii)

Islamic financial business Islamic financial

business

Rule

9.5.1 (1) (A) (ii)

AAOIFI AAOIFI

Rule 9.5.1 (2),

definition of

applicable relevant

standards,

paragraphs (a) and

(b)

Islamic financial business Islamic financial

business

Rule 9.5.1 (2),

definition of

applicable relevant

standards,

paragraph (b)

AAOIFI AAOIFI

Rule 10.7.1 (2) (e) ISFI ISFI

Rule A4.4.2 (1) Rule A4.4.1. rule A4.4.1.

Rule A4.4.3 Rule 10.6.1, rule 10.6.1,

Explanatory note

The amendments made by the table remove unnecessary italics and capitalisation.

[3.76] Headings to rules

for each rule specified in column 1 of the table, insert the heading in

column 2

Column 1

rule

Column 2

heading

2.1.1 Application—Chapter 2

2.2.1 What applicant must demonstrate



Column 1

rule

Column 2

heading

2.3.1 What Regulatory Authority will consider

2.4.1 When applicant must be body corporate

3.1.1 Regulatory status not to be misrepresented

3.1.2 Disclosures that must be in business documents

3.5.1 Certain extracts to be evidence


9.2.1 Matters about which accounting records must be kept

9.2.2 How long accounting records must be retained

9.3.1 Accounting standards generally

9.3.2 Accounting standards—Islamic financial institutions

9.3.3 Accounting standards—firms that operate Islamic windows

9.6.1 Change in financial year end—QFC entity

9.6.2 Change in financial year end—non-QFC entity


10.2.1 Application not submitted until fee paid

10.2.2 Increase of sum due if fee not paid

10.2.3 Regulatory Authority’s power to reduce or waive fees



page 53

Column 1

rule

Column 2

heading

10.3.1 Regulatory Authority may require supplementary fees in certain cases

10.4.1 What application fees are payable

10.4.2 Fees not refundable

10.5.1 What annual fees are payable

10.5.2 When annual fees payable

10.6.1 Fees payable for extracts from Regulatory Authority registers

A4.1.1 Base fees

A4.2.2 Application fee for approval of individuals

A4.3.1 Fees for application—firm to conduct additional regulated activities

A4.4.1 Initial annual fee

A4.4.2 Subsequent annual fees

A4.4.3 Fee for extracts from Regulatory Authority registers

Part 3.5 Individuals (Assessment, Training and Competency) Rules 2014


substitute

(1) Subject to subrule (6), an authorised firm must maintain a register of

all the individuals who perform the customer-facing function for it.



Explanatory note

This amendment and the next provide an exception from the obligation to enter in the register the

names of certain individuals who perform the customer-facing function only in relation to

business customers.

[3.78] After subrule 4.1.7 (5)

insert

(6) The firm need not make an entry in the register for an individual who:

(a) is employed by a related firm, or is employed by the firm but is

not ordinarily resident in Qatar; and

(b) performs the customer-facing function for the firm:

(i) only in relation to business customers; and

(ii) only infrequently, and in any event in no more than

3 transactions in any 1 calendar year.

Part 3.6 Insurance Business Rules 2006

[3.79] Rule 1.2.7 (b) (including the note)

substitute

(b) a QFC insurer operating an Islamic window (within the meaning

given by ISFI, rule 8.1.1).

Note 1 QFC insurer is defined in r 1.2.3.

Note 2 ISFI rule 8.1.1 is as follows:

8.1.1 What is an Islamic window?

If an authorised firm conducts a part (but not the whole) of its business in

accordance with Shari’a, the part so conducted is an Islamic window.

Explanatory note

This amendment inserts a definition of the term Islamic window, which is used only once in these

Rules, to avoid the need for readers to refer to the definition in ISFI.

[3.80] Rule 6.1.1 (2), guidance 1

omit

ISFI



page 55

insert

ISFI

Explanatory note

This amendment and the next 3 remove unnecessary italics.

[3.81] Part 6.6, guidance 2

substitute

AAOIFI

insert

AAOIFI

[3.82] Rule 6.6.1 (2)

omit

AAOIFI

insert

AAOIFI

[3.83] Rule 8.4.2

omit

AAOIFI

insert

AAOIFI

[3.84] Rule 9.1.2 (1)

omit

an investigation

insert

an actuarial investigation

Explanatory note

This amendment and the next 3 provide clarity on the requirements for insurers’ periodic financial

condition reports.



[3.85] After rule 9.1.2 (1)

insert

Guidance

An actuarial investigation is a full analysis of individual policy and claims data and

other relevant information using actuarial techniques to estimate technical

provisions.

[3.86] Rule 9.1.3 (3)

omit

the relevant professional standards.

insert

the relevant professional actuarial standards, and must use

appropriate actuarial valuation principles, techniques and

methodologies.

[3.87] Rule 9.1.3 (4) (d)

omit

rule 8.6.8;

insert

rule 8.6.8, using the relevant professional actuarial standards and

appropriate actuarial valuation principles, techniques and

methodologies;

[3.88] Glossary, definitions of Islamic financial business and Islamic financial institution

omit

ISFI

insert

ISFI

Explanatory note

This amendment removes unnecessary italics.



page 57

[3.89] Glossary

insert



ISFI means the Islamic Finance Rules 2005.

Explanatory note

This amendment inserts 2 definitions.



column 2

Column 1

rule

Column 2

heading

1.5.1 Certain kinds of insurance business not to be combined

3.1.1 Application of Chapter 3

3.2.1 Insurers’ eligible capital

3.2.2 Insurers to have appropriate systems and controls

3.2.4 Insurers to be able to demonstrate compliance

3.8.3 Criteria for approving use of internal models


4.2.1 Calculating eligible capital

4.2.2 Eligible capital calculation table

4.3.1 Components of tier 1 capital

4.4.3 Assumed amortisation of subordinated debt

4.5.1 Legal opinions on tier 2 capital instruments



Column 1

rule

Column 2

heading

4.7.1 Instruments not to be included in tier 2 capital—exceeding 100% of tier 1 capital

4.7.2 Instruments not to be included in lower tier 2 capital—exceeding 50% of tier 1 capital

4.8.1 Tier 1 capital not to be reduced without approval

4.8.2 Capital plan to be provided

4.8.3 Notice to be given of proposed reduction of tier 2 capital

4.9.1 Dividends and distributions to be reported


5.2.1 Long term insurance funds to be established

5.2.3 Treatment of branches

5.3.1 Business to be attributed to long term insurance funds

5.3.2 Attribution of general insurance contracts

5.4.1 Separate identification of assets, liabilities, revenues and expenses

5.4.2 Recording of assets, liabilities, revenues and expenses

5.4.3 Attribution of assets not already attributed

5.4.4 Recording of revenues and expenses



page 59

Column 1

rule

Column 2

heading

5.4.5 Accounting and other records to be maintained

5.5.1 Application of assets

5.5.2 Assets of long term insurance funds not to be transferred

5.5.3 Assets of long term insurance funds not to be distributed

5.5.4 Payment of dividends by insurers constituting single long term insurance funds

5.5.5 Assets not to be lent

5.5.6 Certain reinsurance-like arrangements prohibited

6.2.1 Takaful funds to be established

6.3.1 Takaful business to be attributed to takaful funds

6.4.1 Books of accounts to be maintained

6.4.2 Takaful entities—accounting and other records

6.4.3 Allocation of assets to takaful funds

6.4.4 Allocation of assets to takaful funds—exceptions

6.4.5 Transactions in assets to be fair

6.5.1 Prohibition on making or attributing loans

6.6.1 Policies about surpluses and deficits

6.6.2 When 2 or more policies permitted



Column 1

rule

Column 2

heading

6.6.3 Copies of policies to be given to Regulatory Authority

6.6.4 Surplus or deficit to be determined annually

6.6.5 Reports of distributions of surplus or deficit to Regulatory Authority

6.6.6 When distributions not permitted

8.2.1 Assets may be valued lower

8.2.2 Liabilities may be valued higher

8.2.3 Approximation of values

8.2.4 Directions by Regulatory Authority

8.3.1 Classification of contracts

8.3.2 Classification of contracts falling into 2 or more categories

8.4.1 Recognition of assets and liabilities

8.4.2 Permitted bases of accounting

8.4.3 Assumptions and methods on which valuations depend

8.4.4 Actuarial principles

8.6.1 Application of Part 8.6

8.6.7 Treatment of premium liability

8.6.8 Treatment of value of future claims payments

8.6.9 Treatment of expected recoveries

8.6.10 Valuation of expected future payments

8.6.11 Valuation of expected future receipts




page 61

Column 1

rule

Column 2

heading

8.7.9 Treatment of policy benefits due before solvency reference date

8.7.10 Treatment of net value of future policy benefits

8.7.12 Valuation of future payments

8.7.13 Valuation of future receipts

8.7.14 Limit of operation of rule 8.7.10

11.2.1 What scheme reports must include

11.3.1 Parties that must ensure notification requirements met

11.3.2 Notices of intention

11.3.3 Provision to policyholders of scheme report summary


12.1.2 Meanings of terms relating to run-off

12.1.3 Compliance with Chapter 12 by insurer directed to go into run-off

12.1.4 Certain contracts to be disregarded


12.2.2 Insurers to give notice of decision to cease business

12.2.3 Insurers in run-off not to effect certain contracts


12.3.2 Insurer voluntarily in run-off to provide run-off plan

12.3.3 Insurer directed to go into run-off to provide run-off plan



Column 1

rule

Column 2

heading

12.3.4 What run-off plans must cover

12.3.5 Application of run-off plan to fund

12.3.7 Regulatory Authority may direct insurer to amend run-off plan

12.5.1 Insurer in run-off not to make distributions

A3.2.2 Effect of guarantee or collateral

A3.2.3 Assets subject to mortgage or charge

A3.4.1 When off-balance sheet asset risk component must be calculated

A3.4.2 How to calculate off-balance sheet asset risk component

A3.4.3 Amount of off-balance sheet asset risk component for derivative contract

A3.4.4 Asset equivalent value

A3.5.1 How to calculate off-balance sheet liability risk component

Part 3.7 Interpretation and Application Rules 2005

[3.91] Glossary

omit the following definitions

AAOIFI

Glossary

Independent Person

Islamic financial business

Islamic financial institution



page 63

Islamic window

Explanatory note

This amendment removes unnecessary definitions.

Part 3.8 Islamic Finance Rules 2005

[3.92] Rule 6.1.4 (c)

omit

authorised firm has deemed

insert

Islamic financial institution considers

Explanatory note

This amendment and the next 5 replace references to “authorised firm” with the more accurate

“Islamic financial institution” and make consequential changes.

[3.93] Rule 6.2.2 (2)

omit

4 months

insert

3 months

Explanatory note

This amendment amends the period within which an authorised firm must give the annual report

of its Shari’a supervisory board to the Regulatory Authority.

[3.94] Rule 6.3.1

omit

An authorised firm

insert

An Islamic financial institution

Explanatory note

This amendment and the next 4 replace references to “authorised firm” with the more accurate

“Islamic financial institution” and make consequential changes.



[3.95] Rule 6.3.1

omit

the authorised firm complies

insert

the institution complies

[3.96] Rule 6.3.1

omit

the authorised firm’s

insert

its

[3.97] Rule 6.3.4

omit

An authorised firm

insert

An Islamic financial institution

[3.98] Rule 6.3.4 (a)

omit

the internal audit function or the compliance function of the

authorised firm; and

insert

its internal audit function or compliance function; and

[3.99] Rule 8.1.4 (2) (a)

omit

rule 3.1.1As



page 65

insert

rule 3.1.1A

Explanatory note


[3.100] Glossary

insert



month means calendar month—that is, the period beginning at the

start of any day of one of the 12 named months of the year and ending:

(a) at the end of the day before the corresponding day on the next

named month; or

(b) if there is no corresponding day—at the end of the last day of

next named month.

QFC means Qatar Financial Centre.

Explanatory note

This amendment inserts definitions of terms used in the rules but not previously defined in them.



column 2

Column 1

Rule

Column 2

heading

3.1.1 Disclosure about Shari’a supervisory board

3.1.2 When disclosure must be made

3.1.3 Disclosure by Islamic insurers

6.1.1 Appointment of Shari’a supervisory board



Column 1

Rule

Column 2

heading

6.1.2 Policy in relation to Shari’a supervisory board

6.1.4 Records of assessment of competency of Shari’a supervisory board

6.1.5 Independence of Shari’a supervisory board

6.1.6 Information about Shari’a supervisory board to be given to Regulatory Authority

6.1.7 Obligation to assist Shari’a supervisory board

6.2.1 Shari’a reviews to be undertaken

6.2.2 Annual Shari’a report

6.3.1 Obligation to perform internal Shari’a reviews

6.3.2 How reviews to be performed

6.3.4 Who must perform internal Shari’a reviews

Explanatory note

The amendments made by the table insert headings into rules that presently have none.



page 67

[3.102] Other minor amendments—italics

amendments in accordance with the following table


Rule

6.2.3 (2) (a) (ii) and

(b) (ii)

QFC QFC

Glossary, definition

of Regulatory

Authority

QFC QFC

Explanatory note

The amendments made by the table remove unnecessary italics.

IBANK (Consequential) Amendments Rules 2015 · 2020. 6. 12. · IBANK means the Islamic Banking...

Documents

Transcript of IBANK (Consequential) Amendments Rules 2015 · 2020. 6. 12. · IBANK means the Islamic Banking...