A. Introduction

1.The purpose of this Banking Prudential Guideline (BPG) is to supplement the AIFC Banking Business Rules (BBR) in establishing the regulatory framework for Authorised Firms carrying out Banking Business. The BPG as well as the BBR Rules are based on the Basel Accords and on the Basel Core Principles for Effective BankingSupervision, issued by the Basel Committee on Banking Supervision. The Basel Committee is the primaryglobal standard-setter for the regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks and regulators worldwide and thereby enhance financial stability.

2.The BPG is aimed at Authorised Firms licensed to carry out Banking Business as defined in the BBR. Essentially, this category of Authorised Firms include Banks, Credit Providers and Broker Dealers as defined in chapter 1 of the BBR. Consistent with the BBR, all the Authorised Firms subject to BBR are referred to as Banks in this BPG.

3.The BPG aims to provide useful guidance to Banks in ensuring compliance with the BBR Rules. This guidance includes detailed calculation methodologies, technical information, formulae, parameters and supplementary information elaborating the supervisory expectations in respect of complying with the Rules in the BBR.

B. Application of BBR

1.The BBR Rules and this BPG apply to all Authorised Firms which meet the definition of Banking Business Firms as defined in BBR 1.4. The BankingBusiness firms includeBanks, Broker Dealers and Credit Providers, which are defined in BBR 1.5, 1.6 and 1.7 respectively. For sake of clarity, eligibility of an Authorised Firm as a Bank or a Broker Dealer subjects that firm to the BBR and the BPG. Authorised Firms licensed by the AFSA to carry out RegulatedActivities like ManagingAssets or Dealing in Investments as Agent are subject to the AIFC PRU (INV) Rules. However, if such firms are also licensed to Accept Depositsor Deal in Investments as Principal, they would meet the definition of Banking Business firms in BBR and consequently BBR and BPG will be applicable to such firms. However, other Rules of the AIFC like the AIFC Conduct of Business Rules or AIFC General Rules relating to the other licensed activities of that Authorised Firm will continue to be applicable to such Banking Business Firms.

Application of BBR chapters to different categories of Banking Business Firms

Application of BPG chapters to different categories of Banking Business Firms

Table with Banking Activities with reference to BBR Rules and BPG sections applicable to each type of activities

2.Consistent with BBR 1.8 (2), the term “Bank” is used in the BPG to refer to all Banking Business

firms, including Broker Dealers. This is consistent with the usage of this term in the BBR. For sake of clarity, all the Rules with reference to a Bank or applying to a Bank are applicable also to Credit Providers and Broker Dealers.

3.Credit Providers as defined in BBR 1.7 are not included in Banking Business firms according to BBR 1.4. A Credit Provider or an Authorised Firm licensed to provide credit will still be subject to BBR and BPG, if it also qualifies as a Bank, i.e. if that firm were also licensed to Accept Deposits orDeal in Investments as Principal. For the sake of clarity,Banks which are licensed to raise funds by way of Deposits would also be typically licensed to provide credit.

4.In case of Banks licensed to operate as branches in the AIFC, the BBR Rules requiring them to hold capital and meet Capital ratios and the Rules relating to the compliance with such Capital ratios are not applicable to such branches. However, Bank branches are required to comply with other BBR Rules including but not limited to Rules on risk management, role of governing body, systems and controls etc.

Table: Application of BBR Rules for Banks operating as branches in the AIFC