1.This Standard articulates specific requirements for the calculation of risk-weighted assets (RWA) to recognize exposure amounts for Counterparty Credit Risk (CCR) for banks in the UAE. It replaces any and all previous approaches to assessment of counterparty credit risk for purposes of regulatory capital calculations. The Standard is based closely on requirements of the framework for capital adequacy developed by the Basel Committee on Banking Supervision, specifically the Standardized Approach for CCR as articulated in The standardized approach for measuring counterparty credit risk exposures, March 2014 (rev. April 2014), and subsequent clarifications thereto by the Basel Committee.

2.This Standard applies to all derivatives transactions, whether exchange-traded or over-the-counter, and also applies to long-settlement transactions (the “in-scope” transactions). In this Standard, references to “derivatives” should be understood to apply to all in-scope transactions.

3.This Standard formulates capital adequacy requirements that needs to be applied to all banks in UAE on a consolidated basis.

4.The Standards follow the calibration developed by the Basel Committee, which includes a maximum risk weight of 1250%, calibrated on a total capital adequacy requirement of 8%. The UAE instituted a higher minimum capital requirement of 10.5% (excluding capital buffers), applicable to all licensed banks. Consequently, the maximum capital charge for a single exposure will be the lesser of the value of the exposure after applying valid credit risk mitigation, netting and haircuts, and the capital resulting from applying a risk weight of 952% (reciprocal of 10.5%) to this exposure.