1.Affiliate: An entity that, directly or indirectly, controls, is controlled by, or is under common control with another entity. The term control as used herein shall mean the holding, directly or indirectly, of voting rights in another entity, or of the power to direct or cause the direction of the management of another entity.
2.Bank: A financial entity, which is authorized by the Central Bank to accept deposits as a bank.
3.Basis risk: The risk of loss arising from imperfect correlation in changes of the rates earned and paid on different instruments with otherwise similar re-pricing characteristics.
4.Board: The Bank’s Board of Directors.
5.Central Bank: The Central Bank of the United Arab Emirates.
6.Central Bank Law: Union Law No (10) of 1980 concerning the Central Bank, the Monetary System and Organization of Banking as amended or replaced from time to time.
7.Central Bank regulation: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
8.Displaced commercial risk: Market pressure to pay a return that exceeds the rate earned on assets financed by the investment account holders of a Bank offering Islamic financial services in order to attract or retain funds provided by investment account holders.
9.Group: a group of entities that includes an entity (the ‘first entity’) and:
a.any Parent of the first entity;
b.any Subsidiary of the first entity or of any Parent of the first entity; and
c.any Affiliate.
10.Interest rate risk (IRR): The risk of loss arising from changes in interest rates. Interest rate risk has a number of manifestations, including basis risk, optionality, re-pricing risk and yield curve risk and can present itself in a Bank’s banking book and in its trading book.
11.Interest rate risk in the banking book (IRRBB): The risk of loss in the banking book caused by changes in interest rates.
12.Islamic Financial Services: Shari’a compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products (Islamic Windows).
13.Option risk: The risk of loss arising from the exercise by a counterparty of an option to re-price, redeem or change maturity of bank assets, liabilities or off balance sheet items.
14.Parent: an entity (the ‘first entity’) which:
a.holds a majority of the voting rights in another entity (the ‘second entity’);
b.is a shareholder of the second entity and has the right to appoint or remove a majority of the Board or managers of the second entity; or
c.is a shareholder of the second entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the second entity;
Or;
d.If the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity.
15.Rate of return risk: The risk that unexpected changes in market rates of return adversely affect the earnings of a Bank offering Islamic financial services.
16.Re-pricing risk: The risk of loss arising from timing differences in the maturity (for fixed-rate) and re-pricing (for floating-rate) of Bank assets, liabilities and off-balance sheet positions.
17.Risk governance framework: As part of the overall approach to corporate governance, the framework through which the Board and management establish and make decisions about the Bank’s strategy and approach to risk management; articulate and monitor adherence to the risk appetite and risks limits relative to the Bank’s strategy; and identify, measure, manage and control risks.
18.Risk limits: Specific quantitative measures, which may not be exceeded, based on, for example, forward looking assumptions that allocate the Bank’s aggregate risk appetite to business lines, legal entities or management units within the Bank or Group in the form of specific risk categories, concentrations or other measures as appropriate.
19.Risk Management function: Collectively, the systems, structures, policies, procedures and people that measure, monitor and report risk on a Bank and if applicable Group-wide basis.
20.Senior Management: The executive management of the Bank responsible and accountable to the Board for the sound and prudent day-to-day management of the Bank, generally including but not limited to the chief executive officer, chief financial officer, chief risk officer and heads of the compliance and internal audit functions.
21.Subsidiary: an entity (the ‘first entity’) is a subsidiary of another entity (the ‘second entity’) if the second entity:
a.holds a majority of the voting rights in the first entity;
b.is a shareholder of the first entity and has the right to appoint or remove a majority of the Board or managers of the first entity; or
c.is a shareholder of the first entity and controls alone, pursuant to an agreement with other shareholders, a majority of the voting rights in the first entity;
Or;
d.If the first entity is a subsidiary of another entity that is itself a subsidiary of the second entity.
22.Yield curve risk: The risk of loss arising from unanticipated shifts of the yield curve adversely effecting a Bank’s earnings or economic value.