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Article 1: Definitions

C 164/2018 Effective from 29/9/2018
  1. 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. 2. Bank: A financial entity, which is authorized by the Central Bank to accept deposits as a Bank.
  3. 3. Banking book: Positions in financial instruments that are available for sale or expected to be held to maturity. The following instruments must be assigned to the banking book:
    1. a. Unlisted equities;
    2. b. Instruments designated for securities warehousing;
    3. c. Real estate holdings;
    4. d. Retail and small and medium-sized enterprise credit;
    5. e. Equity instruments in a fund in which the Bank cannot look through the fund daily or obtain daily prices for its investment in that fund;
    6. f. Derivative instruments that have instruments of the type specified in 1.3.a through 1.3.e above as underlying assets;
    7. g. Instruments held for the purpose of hedging a particular risk of a position in the types of instruments of the type specified in 1.3.a through 1.3.e above; and
    8. h. Any other instrument as may be determined by the Central Bank.
  4. 4. Board: The Bank’s Board of Directors.
  5. 5. Central Bank: The Central Bank of the United Arab Emirates.
  6. 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. 7. Central Bank regulations: Any resolution, regulation, circular, rule, standard or notice issued by the Central Bank.
  8. 8. Financial instrument: Any contract that gives rise to both a financial asset of one entity and a financial liability of another entity. Financial instruments include primary financial instruments (or cash instruments) and derivative financial instruments. A financial asset is any asset that is cash and or, the right to receive cash or another financial instrument. A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial liabilities under conditions that are potentially unfavourable.
  9. 9. Group: A group of entities that includes an entity (the ‘first entity’) and:
    1. a. any Parent of the first entity;
    2. b. any Subsidiary of the first entity or of any Parent of the first entity; and
    3. c. any Affiliate.
  10. 10. Independent price verification: The process by which market prices or model inputs are regularly verified for accuracy. Independent price verification is distinct from daily marking-to-market. Independent price verification entails a higher standard of accuracy in which the market prices or model inputs are used to determine profit and loss figures, whereas daily marks are collected primarily for management reporting in between reporting dates.
  11. 11. Islamic Financial Services: Shari’a compliant financial services offered by Islamic Banks and Conventional Banks offering Islamic banking products (Islamic Windows).
  12. 12. Market risk: The risk of losses in on- and off-balance sheet positions arising from movements in market prices. For the purposes of these Standards, these risks are,
    1. a. In the trading book of the bank, the risks pertaining to interest rate related instruments and equities, and
    2. b. Throughout the bank, the risks pertaining to foreign exchange and commodities.
  13. 13. Marking-to-market: Valuation of positions at readily available close-out prices in orderly transactions that are sourced independently. Examples of readily available close-out prices include exchange prices, screen prices, or quotes from several independent reputable brokers. Marking-to-market may be performed by dealers. Daily marking-to-market is distinct from independent price verification.
  14. 14. Marking-to-model: Any valuation, which has to be benchmarked, extrapolated or otherwise calculated from a market input.
  15. 15. Parent: An entity (the ‘first entity’) which:
    1. a. holds a majority of the voting rights in another entity (the ‘second entity’);
    2. b. is a shareholder of the second entity and has the right to appoint or remove a majority of the Board of directors or managers of the second entity; or
    3. 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;

    4. d. If the second entity is a subsidiary of another entity which is itself a subsidiary of the first entity.
  16. 16. Residual risk: The risk exposure after controls are considered.
  17. 17. Risk appetite: The aggregate level and types of risk a Bank is willing to assume, decided in advance and within it risk capacity, to achieve its strategic objectives and business plan.
  18. 18. 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.
  19. 19. Risk limits: Specific quantitative measures that 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.
  20. 20. Risk Management function: Collectively, the systems, structures, policies, procedures and people that measure, monitor and report risk on a Bank-wide and, if applicable, Group-wide basis.
  21. 21. 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.
  22. 22. Subsidiary: An entity (the ‘first entity’) is a subsidiary of another entity (the ‘second entity’) if the second entity:
    1. a. holds a majority of the voting rights in the first entity;
    2. b. is a shareholder of the first entity and has the right to appoint or remove a majority of the board of directors or managers of the first entity; or
    3. 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;
    4. d. If the first entity is a subsidiary of another entity that is itself a subsidiary of the second entity.
  23. 23. Trading book: Positions in financial instruments and commodities held either with trading intent or in order to hedge other elements of the trading book. Any instrument held for one or more of the following purposes must be assigned to the trading book:
    1. a. Short-term resale;
    2. b. Profiting from short-term price movements;
    3. c. Locking in arbitrage profits;
    4. d. Hedging risks that arise from instruments meeting criteria 3.16.a through 3.16.c above; and
    5. e. Any other instrument as may be determined by the Central Bank.