Chapter 1 General
1.1 Introduction
The purpose of this 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.
1.2 Commencement
These rules commence on 1 2018.
1.3 Effect of definitions, notes and examples
(1) A definition in the glossary to these rules 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 the particular 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.
1.4 Banking Business firms
(1) Banking Business comprises the Regulated Activities of Accepting deposits and Dealing in Investments as Principal. An Authorised Firm that has an authorization 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 (within the respective meanings of the AIFC Islamic Banking Business Prudential Rules No. FR0014 of 2017) 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.
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 deals 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.
1.5 Bank
(1) An Authorised Firm is a Bank if it is authorised to conduct the Regulated Activity of Accepting Deposits.
(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 qualifies an Authorised Firm as a Bank.
1.6 Broker Dealer
(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) A 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 rules in PRU (INVT) and are not subject to the BBR rules.
1.7 Legal form that firms must take
(1) A Bank must be:
(a) a limited liability company incorporated under the AIFC Companies Regulations or
(b) a branch of a Foreign Company, registered as a Recognised Company in the AIFC with the Registrar in accordance with the AIFC Companies Rules.
(2) A Broker Dealer must be:
(a) a limited liability company incorporated under the AIFC Companies Regulations;
(b) a branch of a Foreign Company, registered as a Recognised Company in the AIFC with the Registrar in accordance with the AIFC Companies Rules; or
(c) a Limited Partnership incorporated under the AIFC Limited Partnership
Regulations.
1.8 Application of these rules—general
(1) Except as stated otherwise, these rules apply to a Person that has, or is applying for, an authorisation to conduct Banking Business, as defined in Rule 1.4(a).
(2) Except as stated otherwise, all references to a Bank in the rest of this BBR Rules must be read as referring also to Broker Dealers, defined in Rule 1.6. 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 (a), except for specific sections or rules wherein their applicability is defined in a particular manner. For sake of clarity, all the regulatory requirements imposed by the BBR Rules apply to Banks and Broker Dealers as defined in Rules 1.5 and 1.6, unless specified otherwise in specific sections or rules of the BBR.
Guidance
It is possible for an Authorised Firm to be authorised both as a Bank under these rules and to hold authorisations for carrying out 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 PRU Rules of the AFSA rulebook.
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 so far as that Chapter would require the branch to hold Capital.
(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 the firm’s significant 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.